Securities Transfer Tax

What Securities Transfer Tax means

STT concerns transfers of securities within the scope of the Securities Transfer Tax Act. The concept includes company shares and members' interests in close corporations. It is relevant to an existing share sale, but the legal meaning of transfer is broader than an ordinary cash purchase and must be read with the statutory exclusions.

An issue of a new security is excluded from the Act's definition of transfer. That distinction is one reason to establish whether an investor is buying an existing holding or subscribing for new shares. The label investment does not answer the tax question by itself.

The taxable amount and any exemption need separate consideration. SARS explains that an unlisted security transferred for no consideration, or consideration below market value, can require market value to be used. A gift or nominal price should therefore not be assumed to produce no STT.

Why the company must address the tax process

For an unlisted security, SARS identifies the issuing company as liable for the tax, with the ability to recover it from the person receiving the security. An agreement between buyer and seller about who bears the cost does not remove the need to identify the statutory party responsible for the SARS process.

Review the transaction date, security, consideration, valuation basis and any claimed exemption. Keep the documents supporting the treatment and identify who will manage the declaration and payment where required. The eSTT service operates through SARS eFiling, and the applicable deadlines should be checked against the actual transaction.

The comparison of a share transfer and a new issue helps establish the transaction type. For a company purchase, the shelf-company due diligence and handover checklist helps ensure tax responsibilities are addressed alongside the ownership record.

Illustrative example: a nominal-price transfer

A shareholder proposes transferring existing shares to a relative for a nominal amount. The parties believe the small price means no tax work is needed. Before recording the transaction as complete, the company checks whether the transfer falls within STT, what value the rules require and whether a specific exemption genuinely applies.

The company retains the agreement, the basis for the valuation and any evidence supporting the exemption analysis. If a declaration and payment are required, the responsible person records their completion separately from updating the securities register and issuing the relevant share certificate.

No tax amount is assumed in this example. Its purpose is to show why relationship, price and paperwork do not independently decide the result. A real transaction may also raise other tax questions that need their own analysis.

What STT does not replace

STT is not the seller's capital gains or income tax calculation, a CIPC amendment fee or a general charge for preparing a share certificate. The same transaction can require consideration under several different rules. Completing one calculation does not demonstrate that the others have been addressed.

Payment of STT also does not prove that a transfer complied with the MOI or that the company has no historical tax exposure. If a basic shelf-company purchase is being considered, distinguish the purchase and handover obligations from the company's continuing tax record, and obtain transaction-specific advice where the value or exemption position is uncertain.