Commissioner for the South African Revenue Service v Bosch and Another

Foschini Group implemented a deferred delivery share option scheme (DDS) in 1997. Senior employees, including Ms Bosch and Mr McClelland, were granted options in 1998 to purchase shares in the group’s listed holding company at a price fixed at grant. The options had to be exercised within 21 days, which they were. Payment for and delivery of the shares occurred in three tranches two, four and six years later. When the final tranches were delivered in 2004, the market value of the shares substantially exceeded the option price. SARS issued additional income tax assessments, contending that the taxable gain arose when the shares were paid for and delivered, not when the options were exercised. The Tax Court partially upheld the taxpayers’ appeals. The full court of the Western Cape High Court found in favour of the taxpayers. SARS appealed to the Supreme Court of Appeal.

Leave to appeal was granted, but the appeal was dismissed with costs, including the costs of two counsel.

The decision authoritatively clarifies that under s 8A(1)(a) the exercise of a share option occurs when the option is accepted, not when shares are later delivered or paid for. It confirms the tax treatment of deferred delivery share option schemes prior to the enactment of s 8C and underscores the importance of statutory context, administrative practice, and legislative amendments in tax interpretation.