An individual works for a South African company. During his employment (2014 to 2019), he received shares as part of his performance. He did not actually pay for these shares nor was anything declared on his IRP5 when the shares were granted to him. The shares granted are for a company outside of Republic of South Africa. The shares are listed. He has now sold the shares in the year 2020. Is it correct that there is no base cost in determining the capital gains tax for the sale of these shares?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Paragraph 20(1)(h)(i) of the Eighth Schedule provides that despite section 23(b) and (f), but subject to paragraphs 24, 25 and 32 and subparagraphs (2) and (3), the base cost of an asset acquired by a person is the sum of … in the case of a marketable security or an equity instrument, the acquisition or vesting, as the case may be, of which resulted in the determination of any gain or loss to be included in or deducted from any person's income in terms of section 8A or 8C, the market value of that marketable security or equity instrument or amount received or accrued from the disposal thereof, as the case may be, that was taken into account in determining the amount of that gain or loss (including where the gain and loss so determined was nil).