Empowerment tax benefits

Dear MoneywebTax.co.za

Is there any concession on the tax payable on the capital gain that will be made by a shareholder in a private company selling its/their shares in a black women's empowerment deal?

Answer:
There are no specific tax advantages for participants in BEE deals, although some of our corporate rules have been designed with these deals in mind. Therefore the usual rules will apply to the scenario described.

In 2004 PDI staff was given shares as part of the bigger BEE transaction. This was locked in until end 2010.

So the first question then is if I dispose of this share in 2011, what tax do I pay? Income tax or CGT?

However, in 2008, because of a huge investment by a Chinese bank, we were told that we had to sell 11,1% of these shares for the deal to go ahead. Now however we are being taxed at our standard income tax rate.

Is this correct or should it be CGT?

Part of the reason for staying at the company obviously is the shares, but if you losing 40% of this value to income tax, then reason to stay greatly reduces.

Answer:
This is quite a complicated question because of the fact that the law applicable to share schemes has changed during 2004, when these rights were originally granted. If these rights were granted before October 26 2004 then the tax consequences would be governed by section 8A of the Income Tax Act (the ITA). From October 26 2004 onwards a new section 8C applies.

The newer provision (8C) was designed specifically to ensure that gains from shares come into the income tax net and to close some of the planning opportunities that applied under the old section (8A). So it is quite possible that the company was correct in treating these gains as being subject to income tax.

This shares is not part of a remuneration strategy, rather we are paying for it through interest free loan. The dividends are used to settle some of this and the balance when the shares are sold.

Answer:
There may well be tax implications associated with the interest free loan as well.

*Billy Joubert is director of tax at Deloitte

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responses to this article

If BE is really a tax on company, headlne should read tax relief not tax benefit! And BEE , AA is a black tax on business and a black mark on the ANC by Free the Rest on March 06 2009, 15:14 Find this comment inappropriate? Report it

SARS YOU GUYS WILL MAKE MORE MONEY WHEN THIS RACIST S*** BEE, BEEE , AA PC C*** has gone . you are loosing billions of rands because we whites , coloureds . indians are not black skin . \ i wonder how much tax generated you get from . .more competent black people , 9% or 12 % if you push it . . .less by DILLIGAF on March 20 2009, 03:45 Find this comment inappropriate? Report it

dilligaf It is individuals like you who have kept Azania in the dark during apartheit by even having your racist gov. to opress Azanians and still gave Us Inferior education. Now, when crime is high U complain when icompetence by Azanians hits you the face you . .more cry foul. Catch Zillenoid and let us build this country together get the f....out and go back when you come from, your own kind do not even want you back. BEE must balance the imbalances that vervoed created to your benefit... Black Pride . .less by Black Power on May 13 2009, 12:53 Find this comment inappropriate? Report it

@ black power Inferior education , ha ha ha ha ha ha , , you guys couldnt read or write without the white man / women teaching you savages to read and write your own language . You guys couldnt read or write , you ran around naked . If i had to . .more go back were i came from , in your words you wouldnt be able to read or write or drive white mans cars , tools etc . Black pride , proud of what , RAPE , selling your girls to old men , the African way . Read the Sunday Times , blacks selling there girls , its the African way . You talk about imbalances , BE PHUKING GRATEFUL THE WHIT MAN TAUGHT YOU TO READ AND WRITE YOU SAVAGE . WITHOUT THE WHITES SA IS PHUK ALL , YOU NEED THE WITES MORE THAN WE NEED YOU . LOOK NORTH , LOOKI AT THE WORLD . YOU BLACK SAVAGES COME LAST . WHAT HAVE YOU INVENTED , YOU LIKE WHITE MANS TOYS , YOU LIKE OUR HOUSES , BUSINESS ETC . IF ALL THE WHITES LEFT SA YOU WILL HAVE NO JOB YOU CLOWN . IMBALANCES HA HA HA HA , WHAT A JOKE , WE WHITES WOULD GROW SA WITHOUT YOU . YOU PULL SA DOWN WITH YOUR WAYS , CRIME ETC . ITS THE AFRICAN WAY . . .less by Dilligaf on June 08 2009, 23:02 Find this comment inappropriate? Report it

@black no power Forgot to mention , the guy with the biggest dong ,/P**** in the WORLD IS A WHITE GUY . HA HA HA HA HA , ITS A MYTH THAT BLACKS HAVE BIG DONGS HA HA HA HA . ALL THE BLACKS I KNOW ARE AVERAGE SIZE AND TELL ME ITS ALL C*** THE MYTH . .more ABOUT BLACKS BIG DONG HA HA HA HA . NO BRAINS , AVERAGE DONG HA HA HA . DING DONG HA HA HA HA . .less by Dilligaf on June 08 2009, 23:08 Find this comment inappropriate? Report it

@Black power . Still waiting for my last post . \ Azania is Zimbabwe , the african way of doing things . We whites gave you a education that you couldnt give yourself to the black race . You blacks couldnt give yourself a education , SO . .more PLEASE DONT SAY INFERIOR EDUCATION WHEN YOU DIDNT HAVE ONE TO BEGIN WITH . The black race is at the mercy of the world , the world doesnt need you racist blacks . you have invented nothing , not even reading or writing your own language . So shut the phuk up . . .less by Dilligaf on June 08 2009, 23:28 Find this comment inappropriate? Report it

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