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Skills Development SARS Code 3718
- 21 August 2024
- Accounting & Financial Reporting
- The Tax Faculty Tax Specialist
1. The Problem / Facts
A company granting vested share options to its employees. Before payout, the company follows the standard procedure of obtaining tax directives. However, it overlooks one crucial detail: Skills Development Levy (SDL) payment. The question arises—should SDL have been paid on this transaction, or was the company correct in excluding it?
2. Applicable Law
- Skills Development Levies Act 9 of 1999, section 3(1); Income Tax Act 58 of 1962, sections 8B and 8C.
- Skills Development Levies Act 9 of 1999, section 3(1): Defines what constitutes “remuneration” for SDL purposes.
- Income Tax Act 58 of 1962, section 8B: Governs the taxation of amounts derived from broad-based employee share plans.
- Income Tax Act 58 of 1962, section 8C: Focuses on the taxation of directors and employees when equity instruments (e.g., shares, options) vest.
3. Application of the Law to the Facts
The amount excluded from remuneration in the Skills Development Levies Act (SDLA) does not include sections 8B and 8C, which deal with employee equity schemes. Therefore, it would appear that this amount should be included in the calculation for remuneration when determining the SDL.
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