This articles discusses the basics of Securities Transfer Tax.
Securities Transfer Tax Act No. 25 of 2007
Securities Transfer Tax Administration Act No. 26 of 2007
Income Tax Act No. 58 of 1962:Sections 42, 44, 45, 46 and 47
Tax Administration Act No. 28 of 2011(effective 1 October 2012)
Securities Services Act No. 36 of 2004:Section 34
Collective Investment Schemes Control Act No. 45 of 2002:Part IV
Securities Transfer Tax – External Guide published by SARS in November 2013
What is it?
Securities Transfer Tax (STT) is levied on every transfer of a security and was implemented from 1 July 2008 under the Securities Transfer Tax Act, No. 25 of 2007, together with the Securities Transfer Tax Administration Act, No. 26 of 2007.
A security means any:
share or depository in a company; or
member’s interest in a close corporation (CC);
Securities transfer tax is levied for:
every transfer of any security issued by:
a close corporation or company incorporated, established or formed inside South Africa; or a company incorporated, established or formed outside South Africa and listed on an exchange and any reallocation of securities from a member’s bank restricted stock account or a member’s unrestricted and security restricted stock account to a member’s general restricted stock account.
Securities tax is levied at the rate of 0,25%.
Who is it for?
Securities transfer tax applies to the purchase and transfers of listed and unlisted securities.
When listed securities are bought or transferred through or from a member or participant, the member or participant is liable for the tax. That member or participant may however, recover the tax payable from the persons to whom the securities were transferred.
The transfer of any other listed security will result in the person, to whom the security is transferred, being liable for the tax. The tax must, however, be paid through the member or participant holding the security in custody. Should this not be the case, the tax must be paid through the company that issued the listed security.
With the transfer of an unlisted security, the company which issued the unlisted security is liable for the tax. The company may however, recover the tax payable from the person to whom the security is transferred.
STT is borne by the purchaser of the shares being transferred, although a number of exemptions may apply. Primary among these are transfers of shares to which the “group relief” provisions in the Income Tax Act apply, as well as a transfer of shares in property rich companies on which transfer duty is levied.
In terms of the de minimis provision in section 8(1)(r), STT will also not apply to transfers of shares where the STT payable is less than R100. No STT is levied on a transfer of shares where the shares transferred have a value of less than R40,000.
It is important to note that STT is levied on the transfer of both listed and unlisted shares, and clients are encouraged, in the interest of a clean tax administrative record, to take their STT obligations seriously.
What steps must be taken?
Any person to whom an unlisted security is transferred must inform the company which issued that security of the transfer within 30 days of the date of that transfer.
An electronic declaration must be completed and sent for the transfer of every security on the SARS e-STT system.
If the securities transfer tax is not paid in full within the set period, interest will be charged at the set rate. A 10% penalty will also be applied, if any amount remains unpaid after the prescribed period or if the taxpayer fails to declare or makes an incorrect statement on the declaration form.
How must you submit eSTT transaction details to SARS?
In order to complete and submit the eSTT transaction the user must register for eSTT purposes on eFiling.
When should it be paid?
Listed securities: Securities transfer tax must be paid by the 14th day of the month following the month during which transfers of listed securities occurred.
Unlisted securities: Securities transfer tax must be paid within two months from the end of the month in which the transfer of the unlisted security took place.
How should it be paid?
Securities transfer tax can only be paid by electronic payment using the SARS e-STT system.
All requests for refunds must be submitted electronically to “firstname.lastname@example.org“.
Author Craig Tonkin