Tax and SARS knowledge base
When is STT due on a transfer of company shares?
When is securities transfer tax payable on a transfer of company shares?
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Direct answer
SARS says Securities Transfer Tax, or STT, is levied on every transfer of a security issued by a company or close corporation incorporated, established or formed in South Africa. It also covers stated transfers of securities issued by a foreign company listed on an exchange. SARS shows the STT rate as 0.25% of the taxable amount.
That does not mean that every change in a company's ownership has the same STT outcome. The legal definition of security, the transfer route, the taxpayer liable, the taxable amount and any exemption need to be checked before the shares change hands.
What this means in practice
STT is a transaction tax, separate from the income-tax and capital-gains consequences for a seller. A share sale can therefore require several analyses. The seller may have an income-tax or capital-gains question; the buyer or intermediary may have STT obligations; the company may need to update its securities register; and a funding or group-reorganisation step can introduce other taxes.
Start with a complete transaction map. Identify the issuing company or close corporation, whether it is South African or a foreign company listed on an exchange, the exact class and number of securities, each transferor and transferee, consideration, effective date and whether a broker, member or participant is involved. Do not rely solely on the commercial term "share sale".
SARS states that for listed securities bought or transferred through or from a member or participant, the member or participant is liable for the tax but may recover it from persons to whom securities were transferred. SARS also says that for another transfer of listed securities, the person to whom the security is transferred is liable. The relevant rules for unlisted securities should be checked with the current legislation and e-STT process.
Step-by-step
- Confirm the security and issuer.
Obtain the company's memorandum, securities register, share certificates or dematerialised holding records, and the transaction agreement. Confirm whether the item being transferred is a security for STT purposes, who issued it and the legal owner immediately before the transfer.
- Map the transfer route.
Identify whether a member or participant handles the transaction, whether the securities are listed or unlisted, and who becomes the transferee. The route matters to the person who must account for STT. Do not assume that the company itself is always the taxpayer simply because its shares are involved.
- Determine the taxable amount and review exemptions.
Prepare a value schedule and retain the documents supporting it. Check the current STT legislation and SARS guidance for the applicable taxable amount, timing and any exemption. SARS materials refer to exemptions in the statute, which must be tested against the actual parties and transaction. Do not use an exemption merely because related parties are involved.
- Complete the applicable e-STT compliance.
SARS says STT payments are made electronically through the SARS e-STT system. Identify the responsible person, calculate and declare through the current process, pay any amount due and keep the electronic confirmation. Do this before the transaction file is closed.
- Update the company records.
Ensure the securities register, resolutions, share certificates or dematerialised holding record accurately reflect the completed transfer. Reconcile the legal record with the agreement, payment evidence and tax-compliance file. A CIPC filing, where needed, is not a substitute for the issuer's own securities record.
Documents and records to keep
Keep the share purchase or transfer agreement, board and shareholder resolutions, securities register, valuation support, proof of consideration, e-STT declarations, payment confirmation and exemption documents. Retain the ownership chart before and after the transaction and a note explaining who was responsible for each tax compliance step.
Important limits and exceptions
This guide does not calculate STT or decide whether an exemption applies. The 0.25% rate shown by SARS must be read with the current definition of taxable amount and the Securities Transfer Tax Act. The transaction may also have capital-gains, income-tax, dividends-tax, VAT, transfer-duty, exchange-control or company-law consequences that STT does not settle.
Do not confuse a reorganisation, buy-back, issue of new shares, transfer between group companies or trust transfer with an ordinary sale. Each can have different rules.
When to get tailored advice
Get advice before signing a material share transfer, a buy-back, an unlisted-company deal, a group restructuring, a transaction involving non-residents or a transfer with an asserted exemption. Advice is also sensible where the value is disputed or the payment includes debt, earn-outs or non-cash consideration.
TaxProof can help build a transaction record checklist. We cannot provide an STT calculation or exemption opinion without the final agreements and ownership facts.