(1)
| (a) |
There shall be included in the taxpayer's income for the year of assessment the amount of any gain made by the taxpayer after the first day of June, 1969, by the exercise, cession or release during such year of any right to acquire any marketable security (whether such right be exercised, ceded or released in whole or part), if such right was obtained by the taxpayer before 26 October 2004 as a director or former director of any company or in respect of services rendered or to be rendered by him as an employee to an employer. |
[Section 8A(1)(a) substituted by section 17(1)(a) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 January 2012]
| (b) |
Where the taxpayer has exercised such right but, by reason of a condition imposed by the said company or employer or the grantor of the right, the taxpayer is not entitled to dispose of the marketable security until after the end of the said year of assessment, the gain made by the exercise of the right shall, if the taxpayer makes an election as provided in paragraph (c), not be included in his income for such year of assessment but shall be included in his income for the year of assessment during which he becomes entitled to dispose of the marketable security: Provided that in the event of the taxpayer's death or insolvency before he becomes entitled to dispose of the marketable security the said gain shall be deemed to have been made by him on the day before the date of his death or insolvency, as the case may be, and shall be assessed accordingly. |
[Section 8A(1)(b) substituted by section 8(a) of Act No. 88 of 1971]
| (c) |
The taxpayer may, in the circumstances contemplated in paragraph (b), elect that the provisions of that paragraph shall apply in respect of the gain referred to in that paragraph, and such election shall be in writing and shall be furnished to the Commissioner not later than the date on which the taxpayer's return of income is furnished for the year of assessment referred to in paragraph (a), or within such further time as the Commissioner may allow. |
(2) For the purposes of this section—
| (a) |
a gain shall be deemed to have been made by the taxpayer by the exercise of a right to acquire any marketable security if the amount by which the market value of such marketable security at the time such right was exercised exceeds the consideration given by the taxpayer for such marketable security and any consideration given by him for such right or the grant of such right: Provided that such market value shall for the purpose of this paragraph be deemed to be the sum which a person having the right freely to dispose of such marketable security might reasonably expect to obtain from a sale of such marketable security in the open market. |
| (b) |
where the taxpayer for a consideration accepts a restriction upon his right to acquire any marketable security such right shall be deemed to be released in part. |
| (c) |
where any gain is made by the exercise, cession or release of a right to acquire any marketable security, such gain shall be deemed to be made at the time when such right is exercised, ceded or released, as the case may be. |
| (3) |
The amount to be included in the taxpayer's income in respect of any gain referred to in subsection (1) shall be— |
| (a) |
where such gain is made by the exercise of a right to obtain any marketable security, the amount referred to in subsection (2) (a); or |
| (b) |
where such gain is made by the cession or release of a right to obtain any marketable security, the amount by which the amount or value of the consideration received by or accrued to the taxpayer for the cession or release, exceeds the amount or value of any consideration given by the taxpayer for such right or the grant of such right. |
| (4) |
In determining under subsections (2) (a) and (3) whether any gain has been made by the exercise, cession or release of a right to obtain any marketable security, and in determining the amount of such gain— |
| (a) |
where any consideration was given by the taxpayer for such right or the grant of such right and the right is exercised, ceded or released in part only or the consideration was given for something in addition to the right, only the portion of such consideration which relates to so much of the right as is exercised, ceded or released, as the case may be, shall be deductible and for that purpose a fair apportionment of such consideration shall be made; and |
| (b) |
no deduction shall be made in respect of any consideration in the form of services rendered or to be rendered or anything done or to be done or not to be done. |
| (5) |
Where any right (hereinafter referred to as the first right) to acquire any marketable security is ceded or released by the taxpayer in whole or in part for a consideration which consists of or includes another right (hereinafter referred to as the second right) to acquire such marketable security or any other marketable security— |
| (a) |
the second right shall for the purposes of this section not be deemed to be consideration for the cession or release of the first right; and |
| (b) |
any gain made by the taxpayer (other than a gain in respect of which section 8C applies or will apply) by the exercise, cession or release of the second right, shall be determined and included in the taxpayer's income as though such gain had been made by the exercise, cession or release of the first right, and for the purpose of determining such gain, the amount to be deducted under subsection (2) (a) or (3) in respect of the amount or value of the consideration given by the taxpayer for the second right shall be deemed to be the consideration given by the taxpayer for the first right or the grant of such right, less so much of the amount or value of that consideration as has been offset by any consideration other than the consideration consisting of the second right. |
[Section 8A(5) substituted by section 10(1) of Act No. 31 of 2005, deemed to have come into operation on 26 October 2004]
| (6) |
For the purposes of this section, a gain made by any person other than the taxpayer by the exercise, cession or release of a right to acquire any marketable security shall be deemed to be made by the taxpayer and shall be included in the taxpayer's income as though it were a gain referred to in subsection (1)— |
| (a) |
if that right was originally obtained by any person other than the taxpayer by reason of the taxpayer's office or former office as a director of any company or any services rendered or to be rendered by the taxpayer as an employee of any employer; or |
| (b) |
if that right was originally obtained by the taxpayer as a director or former director of any company or in respect of services rendered or to be rendered by him as an employee to an employer, and— |
| (i) |
the right was ceded by the taxpayer to any person otherwise than by or under a cession made by way of a bargain at arm's length; or |
| (ii) |
the gain was made by a relative of the taxpayer. |
[Section 8A(6) substituted by section 8(c) of Act No. 88 of 1971]
| (7) |
The provisions of subsections (2), (3), (4) and (5) shall mutatis mutandis apply in relation to the determination of any gain referred to in subsection (6). |
| (8) |
Where any gain is made after the first day of June, 1969, by the exercise, cession or release of a right to acquire any marketable security granted to any person on or before that date. the amount required to be included in income under this section in respect of such gain shall be reduced by an amount which bears to the amount of the gain, as determined under the preceding provisions of this section, the same ratio as the exemption period, as determined under subsection (9) in relation to the said gain, bears to the accrual period, as so determined. |
[Section 8A(8) substituted by section 8(1) of Act No. 52 of 1970]
| (9) |
For the purposes of determining any reduction to be made under subsection (8) in respect of any gain made by the exercise, cession or release or any right to acquire any marketable security— |
| (a) |
the exemption period shall be deemed to be the period commencing on the date on which the person referred to in subsection (8) was granted such right and ending on the first day of June, 1969; and |
| (b) |
the accrual period shall be deemed to be the period commencing on the first day of the exemption period and ending on the date on which such right is exercised, ceded or released, as the case may be. |
| (10) |
For the purposes of this section "marketable security" means any security, debenture, share, option or other interest capable of being sold in a share-market or exchange or otherwise. |
[Section 8A substituted by section 17(1)(b) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 January 2012]
Public Service Commission Act, 1997
