| Thu 21 Feb 2008, 16:58 | | SBK - Standard Bank - Tax Considerations Relevant To Transaction With ICBC |
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SBK
SBK
SBK - Standard Bank - Tax Considerations Relevant To Transaction With ICBC
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/017128/06)
South African Share Code: SBK
Namibian Share Code: SNB
ISIN: ZAE000057378
("Standard Bank" or "the group")
TAX CONSIDERATIONS RELEVANT TO TRANSACTION WITH ICBC
INTRODUCTION
Further to the announcement released on the Securities Exchange News Service
("SENS") of the JSE Limited ("JSE") on 14 February 2008 and published in the
press on 15 February 2008, shareholders will be aware that the effective date of
the transaction by means of which, inter alia, Industrial and Commercial Bank of
China Limited ("ICBC") is to acquire 11.11% of the shares held by each
shareholder in Standard Bank pursuant to a scheme of arrangement in terms of
s311 of the Companies Act, is 15 February 2008. As previously announced, the
Last Day to Trade in order to receive the scheme consideration in respect of
this transaction is 22 February 2008 and the operative date thereof is 3 March
2008.
Standard Bank takes this opportunity to bring some related tax issues to the
attention of shareholders, as these issues have been favourably affected by
recent tax legislation, and may have a material effect on shareholders. This
notice relates specifically to ordinary shareholders with direct holdings in
Standard Bank and should not be construed as applying to participants in the
group`s black ownership initiatives or its general staff share scheme. Because
there may be some differences in the tax treatment of these participants, this
communication does not apply to them, and there will be a separate communication
to them shortly.
This notice should not be taken as constituting definitive tax advice, and we
strongly urge all shareholders who believe that these issues may affect them to
take appropriate professional advice.
DEEMED CAPITAL NATURE
In terms of a 2007 tax amendment, the scope of existing safe-haven provisions
(which deem certain gains to be capital rather than revenue in nature) has been
favourably widened. These provisions apply to all qualifying shares held for 3
years (previously 5 years), and the concession applies automatically (previously
it had to be elected). Qualifying shares include all holdings in South African
resident listed and unlisted companies, as well as listed foreign companies, and
shareholders` Standard Bank shares will thus constitute qualifying shares
provided that they have been held for three years or more. (See section 9C to
the Income Tax Act.)
ROLL-OVER RELIEF
In terms of a further 2007 tax amendment, Capital Gains Tax ("CGT") roll-over
relief is available to taxpayers who are required to sell shares in terms of a
scheme of arrangement in terms of section 311 of the Companies Act, provided
that they replace their sold shares with newly purchased shares in the same
company within 90 days after this sale. In terms of this rollover relief, the
capital gain is not taxed immediately, to the extent that the proceeds of such a
sale are applied to replace the shares, and the cost of the new shares is
instead reduced by this gain, thus ensuring that the gain is effectively subject
to CGT only once the new shares are sold.
Since the scheme of arrangement in terms of which ICBC will acquire 11.11% of
the shares held by each shareholder is governed by section 311 of the Companies
Act, shareholders are entitled to replace their shares sold in terms of the
scheme with newly-purchased Standard Bank shares and to then claim this roll-
over relief. If there is an excess, where the capital gain exceeds the sum used
to purchase replacement shares, this excess will remain taxable in the current
tax year.
Note that this roll-over relief does not apply if the shareholder in question is
subject to Income Tax rather than CGT. (See paragraph 42A of the Eighth Schedule
to the Income Tax Act.)
TIME OF ACCRUAL
Since all suspensive conditions relating to the transaction with ICBC were
fulfilled during February 2008, individual shareholders (and other shareholders
with tax years ending at the end of February) should be aware that the tax
accrual of the ICBC proceeds will have occurred in the tax year ending 29
February 2008. If a shareholder is eligible for tax, and does not opt for roll-
over relief, this will mean that the proceeds must be taken into account in such
shareholder`s tax calculation for the 2008 tax year. If a shareholder does opt
for roll-over relief, such shareholder will still be required to make
appropriate disclosure in their 2008 tax return, and will also be taxable on any
excess, should such excess exist, as discussed immediately above.
Johannesburg
21 February 2008
Sponsor
Standard Bank
Date: 21/02/2008 16:58:08 Produced by the JSE SENS Department.
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completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
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