BPR 373: Securities transfer tax (STT) implications of a proposed transfer of listed shares.

BPR 373 determines whether the transfer of the beneficial interest in listed shares, to the applicant to hedge its exposures under intra-group over-the-counter (“OTC”) derivative transactions entered into directly with the foreign broker, will be exempt from securities transfer tax (“STT”).

The applicant is a resident company which is an “authorised user” as defined in the Financial Markets Act 19 of 2012 and a member of JSE Limited. The foreign broker is a non-resident which is a fellow subsidiary of the applicant. The foreign broker serves as the primary broker-dealer for clients outside of South Africa.

The applicant applied for a ruling from SARS in respect of OTC derivative transactions it will be offering to its clients, which can be ordered either through OTC orders or through a process referred to as ‘co-location connectivity’. The nature of OTC derivative and co-location transactions are described in detail in the ruling.

The following ruling is made by SARS in respect of the applicant’s proposed transaction:

• The acquisition of listed shares by the applicant to net hedge its exposure under an Intercompany OTC Derivative entered into with the foreign broker, and the “transfer” of such listed shares to the applicant pursuant to such acquisition, will be exempt from STT under section 8(1)(q) of the STT Act, if the listed shares are allocated to the applicant’s “unrestricted and security restricted stock account”
• The acquisitions of listed shares by the applicant in consequence of co-location connectivity to net hedge its exposure under intercompany OTC Derivatives entered into with the foreign broker, and the “transfer” of such listed shares to the applicant pursuant to such acquisitions, will be exempt from STT under section 8(1)(q) of the STT Act if the listed shares are allocated to the applicant's “unrestricted and security restricted stock account”.

The ruling also indicates that the proposed transaction has not been considered from an income tax or dividends tax perspective.

A copy of BPR 373 can be accessed here.

30/05/2022