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Uncertificated Securities Tax
What is uncertificated securities tax?
Uncertificated securities tax (UST) is a tax imposed on the issue of, and on the transfer of, beneficial ownership of securities listed on the JSE Securities Exchange. This tax is governed by the Uncertificated Securities Tax Act 31 of 1998.
With effect from 1 January 2006 no UST is payable on the issue of listed securities.
Uncertificated securities tax is payable as a percentage of the consideration paid in the transaction.
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Why does uncertificated securities tax exist?
All listed shares have been dematerialised: the JSE Securities Exchange now runs a system called the Share Transactions Totally Electronic system, or STRATE.
Ownership of the dematerialised shares is electronically transferred; there is now no need to fill in any paper. As a result, amendments to the Stamp Duties Act 77 of 1968 and the Marketable Securities Tax Act have been effected to ensure that uncertificated securities tax is paid on the transfer of ownership of shares that have been dematerialised.
Who is exempt?
Their are a few transactions where UST is not payable. Please see section 6 of the UST Act, 1998, for more details.
Where should Duty be defaced?
All instruments shall be written and stamped in such a manner that duty will be defaced on the front page of the instrument.
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What rates apply to unlisted marketable securities?
(1) Registration of transfer:
- 2,5 cents for every R10, or part thereof, of the amount or value of the consideration given, or when the consideration given is less than the market value, the value of the marketable security transferred
(2) Cancellation or redemption of company shares:
- 2,5 cents for every R10, or part thereof, on the value of the consideration given
(3) Acquisition by transferee from transferor:
- 2,5 cents for every R10, or part thereof, of the amount or value of the consideration given, or where no consideration is given, on the value of the marketable security transferred
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How should the payment be shown on marketable security investments?
a. Adhesive stamp on the front page of the document, and the stamp must be defaced (initial with true date).
b. Franking machine imprint on the front page of the document.
c. Pay by BANK cheque at SARS office, attach special receipt to the document
d. e-Stamps – attach electronic receipt with the wording “duty paid” to the document
Who is liable to pay the Stamp Duty?
Section 7 of the Act prescribes who are liable to pay the duty in the case of:
· The registration of transfer of a marketable security, as contemplated in Item 15(3) of Schedule 1, the transferee;
· The cancellation or redemption of company shares, as contemplated in Item 15 (4) of Schedule 1 , the company of which the shares are cancelled or redeemed;
· The acquisition of any marketable security as contemplated in Item 15 (5) of Schedule 1, the person by whom such marketable security is acquired;
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When is Stamp duty payable on the relevant security instruments?
(1) Registration of transfer of a marketable security:
(i) in the case where registration is in the name of a broker, or the nominee of a broker, the instrument of transfer referred to in section 23 must be stamped before the expiry of a period of 3 months from the date of execution of the relevant instrument of transfer; or
(ii) in any other case, the instrument of transfer referred to in section 23 must be stamped before the expiry of a period of six months from the date of execution of the relevant instrument of transfer; or
(2) Cancellation or redemption of company shares: Before or within 30 days from the date on which the company shares were cancelled;
(3) The acquisition by any person from any other person under any of the circumstances mentioned in item 15 (5) (a), (b) or (c) to Schedule 1, the relevant deed or declaration referred to in section 23 (15) must be stamped before the expiry of a period of six months from the date of that acquisition.
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How do you calculate days being referred as the prescribed period?
Calculating 30 days:
Excluding the first day and including the last day. If the last date ends on a Sunday or public holiday, duty must be paid on the next first business day after that Sunday or public holiday. If the last date ends on a Saturday, the duty must be paid on that Saturday even though SARS is closed, revenue stamps can be purchase at any SA Post Offices.
Calculating the 3 months or 6 months period:
in determining a period which is express in months regard must be had to a calendar month, which is the time reckoned by looking at the calendar and not by counting days (Brett, LJ Migotti v Collvile, 4 CPD 233). For example, where an instrument has to be stamped within three months after the date of execution, the period of three months is reckoned from the day of execution to the day numerically corresponding to that day in three months time, less one. Thus, if the instrument is executed on 23 June, the three month’s period will end on 22 September.”
Which documents will be stamped in respect of marketable securities?
(1) Registration of transfer of a marketable security: the CM42 form;
(2) Cancellation or redemption of company shares: A copy of the application to Court; take-over or resolution letter;
(3) Acquisition by any person from any other person under any of the circumstances mentioned in Item 15 (5) (a), (b) or (c) to
Schedule 1, the relevant deed or declaration
What gives SARS the authority to impund documents?
Documents are impounded in terms of section 13(1)(b) of the SD Act, 1968.
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Why does SARS impound documents?
Section 13 of the Stamp Duties Act, 1968, permits SARS to impound documents when it is submitted to SARS for stamping and the period in which the duty had to be paid on the document has been elapse. This is to ensure that the document is duly stamped. SARS may also impound documents when found not duly stamped when inspection is done by SARS or when evasion or fraud of taxes and duties are expected by SARS.
Penalty prior to 1 March 2005
(a) Where duty was not paid within 6 months of date of execution of the CM42 form, but it was paid within a period of 6 months: double the duty will be applicable;
(b) Where duty was not paid within 6 months of date of execution but it was paid after a period of 6 months: triple the duty will be applicable;
(c) This above amount of penalty is limited to R4000 per instrument.
(d) The Commissioner may also levy a further penalty, limited to R4000 if evasion or fraud of taxes and duties are expected.
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Interest and penalty after 1 March 2005
(a) Interest in terms of section 9 at 10% per annum where stamp duty is not paid timorously, on the balance of stamp duty outstanding in respect of each month or part thereof during which duty remains unpaid;
(b) Penalty in terms of section 9A at 10% on the amount of stamp duty due,
(c) Additional duty in terms of section 9B may be charged not exceeding double the duty in cases of evasion section 76S of the Income Tax Act.
How long must records be kept?
All dutiable instruments and information relating to them must be kept for 5 years or until the last date the instrument is applicable to, whichever is the latest.
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Franking machines and adhesive revenue stamps
SARS is in the process of phasing out the use of franking machines and adhesive revenue stamps as a method of paying stamp duty on lease agreements. E-Stamps, was introduce as a new method of stamping lease agreements.
Where can I get the Stamp Duties Act?
The Indirect Tax Handbook may be purchase at Justas and LexisNexis.
Rev 16 and Rev 17 forms – Which forms should be used when claiming a refund?
Rev 17: The duty was defaced by adhesive stamps or by a franking machine;
Rev 16: The duty was defaced by a special receipt issued by a SARS office
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How will the new Securities Transfer Tax Act, 2007, effects the UST Act, No 31 of 1998?
The Stamp Duties Act, 1968, caters for unlisted securities whereas the UST Act, 1998 caters for listed securities. The dichotomy in events that give rise to the tax payable, results in anomalies and also complicates the administration of the tax/duties.
In view of the above, the rules both Acts governing listed and unlisted securities be merged into a new Act, the Securities Transfer Tax Act, 2007, to provide for the levying of a single tax in respect of any transfer of a listed or unlisted security. This merger will ensure that the rules governing both listed and unlisted securities are consistent.
When will the Securities Transfer Tax Act, 2007 be effective?
The Securities Transfer Tax Act, 2007, will be effective as from 1 July 2008 and will be applicable on any transfer of listed or unlisted securities which occurred on or after this date.
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