‘qualifying purpose’ means a qualifying purpose as defined in section 8EA(1).
Author: admin_kmos
“Preference share” definition of section 8E of ITA
‘preference share’ means a preference share as defined in section 8EA(1);
“Hybrid equity instrument” definition of section 8E of ITA
‘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]
“Financial instrument” definition of section 8E of ITA
‘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;
“Date of issue” definition of section 8E of ITA
(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;
Section 8E (ITA) – Dividends derived from certain shares and equity instruments deemed to be income in relation to recipients thereof
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]
“Unrestricted equity instrument” definition of section 8C of ITA
‘unrestricted equity instrument’ means an equity instrument which is not a restricted equity instrument.
“Restricted equity instrument” definition of section 8C of ITA
‘restricted equity instrument’ in relation to a taxpayer means an equity instrument –
(a) which is subject to any restriction (other than a restriction imposed by legislation) that prevents the taxpayer from freely disposing of that equity instrument at market value;
(b) which is subject to any restriction that could result in the taxpayer-
(i) forfeiting ownership or the right to acquire ownership of that equity instrument otherwise than at market value; or
(ii) being penalised financially in any other manner for not complying with the terms of the agreement for the acquisition of that equity instrument;
(c) if any person has retained the right to impose a restriction contemplated in paragraph (a) or (b) on the disposal of that equity instrument;
(d) which is an option contemplated in paragraph (a) of the definition of ‘equity instrument’ and where the equity instrument which can be acquired in terms of that option will be a restricted equity instrument;
(e) which is a financial instrument contemplated in paragraph (b) of the definition of ‘equity instrument’ and where the equity instrument to which that financial instrument can be converted will be a restricted equity instrument;
(f) if the employer, associated institution in relation to the employer or other person by arrangement with the employer has at the time of acquisition by the taxpayer of the equity instrument undertaken to –
(i) cancel the transaction under which that taxpayer acquired the equity instrument; or
(ii) repurchase that equity instrument from that taxpayer at a price exceeding its market value on the date of repurchase,
if there is a decline in the value of the equity instrument after that acquisition; or
(g) which is not deliverable to the taxpayer until the happening of an event, whether fixed or contingent; and
“Market value” definition of section 8C of ITA
“market value” in relation to an equity instrument-
(a) of a private company as defined in the Companies Act or a company that would be regarded as a private company if it were incorporated under that Act, means an amount determined as its value in terms of a method of valuation –
(i) prescribed in the rules relating to the acquisition and disposal of that equity instrument;
(ii) which is regarded as a proxy for the market value of that equity instrument for the purposes of those rules; and
(iii) used consistently to determine both the consideration for the acquisition of that equity instrument and the price of the equity instrument repurchased from the taxpayer after it has vested in that taxpayer; or
(b) of any other company, means the price which could be obtained upon the sale of that equity instrument between a willing buyer and a willing seller dealing freely at arm’s length in an open market and, in the case of a restricted equity instrument, had the restriction to which that equity instrument is subject not existed;
“Equity instrument” definition of section 8C of ITA
‘equity instrument’ means a share or a member’s interest in a company, and includes –
(a) an option to acquire such a share, part of a share or member’s interest;
(b) any financial instrument that is convertible to a share or member’s interest; and
(c) any contractual right or obligation the value of which is determined directly or indirectly with reference to a share or member’s interest;