What is Securities Tax transfer?
Securities Transfer Tax 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.
- As the demand for liquid assets is increasing as a result of higher capital and liquidity requirements, most debt agreements involve the use of collateral and this takes two forms, firstly a pledge which carries no tax implications and secondly an outright transfer which does carry tax implications
- When an outright transfer of collateral is executed during a securities lending transaction, equity securities are subject to both income tax and securities transfer tax due to the fact that the outright transfer of collateral involves the actual transfer of beneficial ownership.
A security means any:
- Share or depository in a company; or
- Member’s interest in a close corporation (CC)
It’s good to remember that any right or entitlement to receive any distribution from a company or close corporation was removed from the definition of a “security” in April 2012.
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
- 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 Securities Transfer Tax 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 that 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
What steps should 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.
When should Securities Tax 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.
Interest and Penalties that apply to Securities Transfer Tax
Interest and a 10% penalty will be imposed in the following way:
- For listed securities: If the payment is made after the 14th of the month following that to which the return refers
- For unlisted securities: If the payment is made after two months from the end of the month in which the security was transferred
The amount of interest and penalties payable will be added to the amount of eSTT from electronic declaration.
Interest cannot be remitted but the Commissioner may remit the penalty in part or in full. To request the remittance of a penalty, the ‘request for refund’ process must be followed.