Section 8E
Section 8E inserted by section 6 of Act 70 of 1989 and amended by section 19 of Act 45 of 2003, section 9 of Act 32 of 2004, section 7 of Act 8 of 2007, section 13 of Act 7 of 2010, section 20 of Act 24 of 2011 and section 10 of Act 22 of 2012 and substituted by section 11 of Act 22 of 2012 effective on 1 April 2012, in the case of dividends or foreign dividends received in cash by any person during any year of assessment of that person that commences on or after 1 January 2013; or effective on 1 January 2013 in the case of dividends or foreign dividends – (i) received by or accrued to any person; and (ii) that are not received by and accrued to that person as contemplated in paragraph (a).
8E. Dividends derived from certain shares and equity instruments deemed to be income in relation to recipients thereof
[Heading of section 8E substituted by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]
(1) For the purposes of this section-
‘date of issue’, in relation to a share in a company, means the date on which-
(a) the share is issued by the company;
(b) the company at any time after the share has been issued undertakes the obligation to redeem that share in whole or in part; or
(c) the holder of the share at any time after the share has been issued obtains the right to require that share to be redeemed in whole or in part, otherwise than as a result of the acquisition of that share by that holder;
“equity instrument” means any right or interest the value of which is determined directly or indirectly with reference to-
(a) a share; or
(b) an amount derived from a share;
[Definition of “equity instrument” inserted by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]
‘financial instrument’ means any-
(a) interest-bearing arrangement; or
(b) financial arrangement based on or determined with reference to a specified rate of interest or the time value of money;
‘hybrid equity instrument’ means-
(a) any share, other than an equity share, if-
(i) the issuer of that share is obliged to redeem that share or to distribute an amount constituting a return of the issue price of that share (in whole or in part); or
[Subparagraph (i) substituted by section 8(1)(a) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]
(ii) the holder of that share may exercise an option in terms of which the issuer must redeem that share or distribute an amount constituting a return of the issue price of that share (in whole or in part),
[Subparagraph (ii) substituted by section 8(1)(a) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]
within a period of three years from the date of issue of that share;
(b) any share, other than a share contemplated in paragraph (a), if-
(i)
(aa) the issuer of that share is obliged to redeem that share or to distribute an amount constituting a return of the issue price of that share (in whole or in part) within a period of three years from the date of issue of that share;
[Item (aa) substituted by section 8(1)(b) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]
(bb) the holder of that share may exercise an option in terms of which the issuer must redeem that share or distribute an amount constituting a return of the issue price of that share (in whole or in part) within a period of three years from the date of issue of that share; or
[Item (bb) substituted by section 8(1)(b) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]
(cc) at any time on the date of issue of that share, the existence of the company issuing that share-
(A) is to be terminated within a period of three years; or
(B) is likely to be terminated within a period of three years upon a reasonable consideration of all the facts at that time; and
(ii)
(aa) that share does not rank pari passu as regards its participation in dividends or foreign dividends with all other equity shares in the capital of the relevant company or, where the equity shares in such company are divided into two or more classes, with the shares of at least one of such classes; or
[Item (aa) substituted by section 12 of Act 23 of 2018 effective on 17 January 2019]
(bb) any dividend or foreign dividend payable on such share is to be calculated directly or indirectly with reference to any specified rate of interest or the time value of money;
[Item (bb) amended by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]
(c) any preference share if that share is-
(i) secured by a financial instrument; or
(ii) subject to an arrangement in terms of which a financial instrument may not be disposed of,
unless that share was issued for a qualifying purpose;
(d) any equity instrument the value of which is determined directly or indirectly with reference to-
(i) a share contemplated in paragraph (a) or (b) or a preference share contemplated in paragraph (c); or
(ii) an amount derived from a share or preference share contemplated in subparagraph (i); or
[Paragraph (d) added by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]
(e) any equity instrument, other than an equity instrument contemplated in paragraph (d), if that equity instrument is subject to a right or arrangement that would have constituted a right or arrangement contemplated in paragraph (a), (b) or (c) had that right or arrangement applied in respect of the share with reference to which the value of that equity instrument is directly or indirectly determined;
[Paragraph (e) added by section 14(1)(d) of Act 15 of 2016 and substituted by section 8(1)(c) of Act 34 of 2019 and by section 7 of Act 20 of 2021]
“issue price” in relation to a share in a company means the amount that was received by or that accrued to that company in respect of the issue of that share;
[Definition of “issue price” inserted by section 8(1)(d) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]
‘preference share’ means a preference share as defined in section 8EA(1);
‘qualifying purpose’ means a qualifying purpose as defined in section 8EA(1).
(2) Any dividend or foreign dividend received by or accrued to a person during any year of assessment in respect of a share or equity instrument must be deemed in relation to that person to be an amount of income accrued to that person if that share or equity instrument constitutes a hybrid equity instrument at any time during that year of assessment.
[Subsection (2) substituted by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]
(2A) Where any share or preference share that was issued in terms of an agreement, all the terms of which were finally agreed to before 1 April 2012 by all the parties to that agreement, constitutes a hybrid equity instrument solely by reason of a right of redemption or a security arrangement acquired in accordance with the terms of that agreement and that right or arrangement is cancelled on or after 26 October 2016 and on or before 31 December 2017-
(a) the provisions of subsection (2) will not apply in respect of any dividend or foreign dividend that accrues in respect of that share after the date of cancellation of that right or arrangement; and
(b) the cancellation of that right or arrangement must not be treated as a disposal of that share if no consideration is payable in respect of that cancellation.
[Subsection (2A) inserted by section 14 of Act 15 of 2016 effective on 19 January 2017]