SECURITIES TRANSFER TAX (STT) – CHANGES TO THE EXEMPTION FOR BROKERS
The Securities Transfer Tax Act 25 of 2007 ("the STT ACT") imposes Securities Transfer Tax ("STT") if there is a "transfer" of SA securities, in other words if beneficial ownership of the shares are transferred.
Section 8(1)(q) of the STT Act provides an exemption from STT for brokers which was further amended on 10 January 2012. The amended exemption applies to transactions entered into on or after 1 January 2011 up to 31 December 2012 and has the effect that a transfer of a security is exempt from STT if the person to whom that security is transferred is a member who purchased the security "in that member's capacity as a principal".
The Explanatory Memorandum to Act 24 of 2011, states that the broker member must be operating as the "beneficial owner" of the acquired share in order to obtain the amended exemption in section 8(1)(q) of the STT Act. It further states that formal treatment as "principal" for JSE purposes is not sufficient by itself to satisfy the beneficial ownership requirement, but in order to not cause a disruption to the market, the expanded exemption would apply to cover all broker-member activities wherein the broker member is acting in the capacity as "principal". However, this expanded exemption will only last until 31 December 2012.
In the Draft Taxation Laws Amendment Bill of 13 March 2012, the section 8(1)(q) exemption is amended further. A transfer of securities will now be exempt if :
the person to whom the security is transferred is a member who purchased the security in that member's capacity as principal, or
the transaction is one in which the person to whom that security is transferred is a member who has purchased the security to provide an equity hedging facility to a third party, or where such member makes the security available for reward to a non-member, by means of a derivative instrument, to enable that non-member to provide an equity hedging facility to a third party.
The commentary to the draft Taxation Laws Amendment Bill of 13 March 2012, states that the 2011 legislation specifically provided relief for brokers holding shares that act as a hedge for derivatives to other parties. The proposed changes are introduced to provide enhanced protection and to protect listed market liquidity (for the two year "interim" period).