The good news is that 12J investments are not just for the wealthy, anyone and everyone can benefit from the great tax incentive. It isn't everyday that the tax man gives you a gift and this is one that you will like. Don't let the complex terminology discourage you from adding this investment to your portfolio.
What does S12J mean?
Section 12J of the Income Tax Act allows an investor to deduct the full amount invested in a Section 12J VCC from their taxable income for the specific tax year.
Below are some of the frequently asked questions about 12J:
What is a Section 12J company?
A Section 12J company is a venture capital company (VCC) through which tax-based incentives are created to attract investors.
Who are 12J investments for?
Any taxpayer who is a resident of South Africa. This includes individuals, companies, and trusts.
How do I get the tax benefit?
There are two ways for you to claim the tax benefit offered:
By reducing your taxable income to submit provisional tax returns.
By receiving a refund of tax through your income tax assessment.
How is the tax benefit calculated?
The tax benefit is claimed in the year the investment is made. Here is an example of how it would be calculated:
Initial Investment: R 1,000,000
*Highest Marginal tax bracket for individuals (45%)
When can I claim the tax benefit?
100% of the tax benefit can be claimed in the same tax year in which the investment is made.
Can SARS change their minds about the tax benefit?
Only if you sell your shares in the VCC before the end of the 5 years.
What are the disadvantages of 12J investments?
You have to hold the investment for a minimum of 5 years to realise the full benefit.
What is the minimum amount I can invest?
Minimums vary depending on each fund starting from R 10,000.
What is the maximum amount I can invest?
The maximum investment for an individual/trust is R 2,500,000 and R 5,000,000 for a company.
With our partnership with Fundamental VCC (FSP No: 48894 and VCC No: 0093) we have introduced a 12J investment that is not just uniquely African. Click here to find out more.