Share Schemes – Budget reaction - tax
01 March 2013
Posted by: Stiaan Klue
incentive schemes are once again in the spot light in this year's tax budget
"It appears that previous amendments have not satisfied Treasury's
concerns on share incentive schemes. Treasury indicates that some staff equity
schemes are used as a tool to lower overall tax rates for executives and
other-high-income earners,” says Andrew Lewis, Senior Associate, Tax, Cliffe
says schemes for lower income taxpayers are sometimes subject to anomalies that
may give rise to double taxation.
thus appears that the broad-based employee share plan contemplated in s8B of
the Income Tax Act will be reviewed and possibly merged with s8C of the Income
Tax Act into a single employee share scheme regime. Section 8B schemes are not
used by many taxpayers owing to the onerous requirements. If the s8C and s8B
share scheme provisions are combined, it is anticipated that it will be to the
detriment of high-net worth individuals.
is also indicated that the interrelationship between employer deductions and
employee share scheme income will be examined by Treasury.
is anticipated that one of the South African Revenue Service concerns is that
taxpayers currently argue that the contributions
to the employee share scheme for their employees are deductible (see Provider v
Commissioner of Taxes, 17 SATC 40), while the contributions received by the
Trust are capital in nature on the basis that the trust is not engaged in a
profit-making scheme (see CIR v Pick 'n Pay Employee Share Purchase Trust 54
SATC 271),” he adds.
By Cliffe Dekker Hofmeyr