Section CE 2 — Income Tax Act 2007: Value and timing of benefits under share purchase agreements

CE 2 Value and timing of benefits under share purchase agreements What this section does (1) This section determines the value of a benefit that an employee receives under a share purchase agreement and the allocation of the benefit to a particular income year. If restrictions apply to the disposal of shares received under a share purchase agreement, section CE 3 applies. If employees acquire shares (2) If an employee acquires shares under a share purchase agreement, the value of the benefit to the employee is the amount by which the value of the shares when they were acquired is more than the amount paid or payable for them. The employee receives the benefit in the income year in which they acquire the shares. If employees dispose of rights to non-associates (3) If an employee disposes of their rights under a share purchase agreement to a person who is not associated with them, the value of the benefit is the consideration for the disposal of the rights. The employee receives the benefit in the income year in which they dispose of the rights. If associates acquire shares (4) If, following 1 or more transactions between associated persons, an associated person acquires the shares under a share purchase agreement, the value of the benefit is the difference between the value of the shares on the date of acquisition by the associated person and the amount paid or payable for them. If the difference is negative, the value is zero. The employee receives the benefit in the income year in which the associated person acquires the shares. If associates dispose of rights to non-associates (5) If, following 1 or more transactions between associated persons, a person who is not an associated person acquires the rights under a share purchase agreement, the value of the benefit is the consideration paid for that disposal. The employee receives the benefit in the income year in which the last associated person disposes of the rights. If shares transferred when employees end employment or die (6) The value of the benefit is zero if a share purchase agreement provides unconditionally that, when the employee ends their employment or service or dies, the shares must be transferred to the employer or to the person from whom they were acquired, either without consideration or for a consideration no more than that paid by the employee. If benefits arise under approved schemes (7) The value of the benefit is zero if the benefit arises under a share purchase scheme. Disposal of rights under share purchase option (8) For the purposes of subsection (3), a disposal of rights under a share purchase agreement includes the cancellation of a share option in return for a cash payment. Reduction of value of benefit in circumstances relating to non-resident (9) The value of a benefit arising from a period of employment is reduced, from the value that the benefit would have in the absence of this subsection,— (a) if, when the employee acquires the shares under the share purchase agreement or disposes of the rights under the share purchase agreement, the employee is a transitional resident; and (b) by an amount calculated using the formula— value before reduction × period employed as non-resident period employed. Defined in this Act: amount , associated person , employee , employer , income year , non-resident , pay , share , share purchase agreement , share purchase scheme , transitional resident Compare: 2004 No 35 s CE 2