Section 12J funds were created in response to the South African Government offering tax incentives for private investors to support funds that support SME growth in South Africa. Three experts unpack the benefits of investing in 12J funds — particularly for high net worth individuals.
Q What is a 12J Fund?
Clive Butkow: In 2009, the South African Government implemented a tax incentive for investors in enterprises through a Venture Capital Company (VCC) regime known as Section 12J.
These funds were set up to help early stage companies raise venture capital to stimulate economic growth and job creation. Section 12J was based on the Venture Capital Trusts (VCT) in the UK, which enable high net worth Individuals to save tax and rather invest in a VCT, which will then invest in start-ups. Individuals, trusts and companies can all invest in a Section 12J company and receive the respective tax deduction.
Neill Hobbs: The South African Revenue Services (SARS) has written Section 12J into the Tax Act, which offers taxpayers a 100% reduction in their taxable income in the year of investment for the amount they invest by way of a subscription for shares in a Section 12J VCC. The VCC then invests into small and mediumsized enterprises (SMEs) with the added intention of creating jobs and securing employment. The VCC must be approved by both SARS and the Financial Services Board.
Q Why is it tax deductible?
Gidon Novick: The legislation provides for a tax deduction providing the fund complies with the requirements of the Act. The intent of the incentive is to stimulate certain critical areas of the South African economy (such as tourism and hospitality) through SME growth in the sector.
Neill: Section 12J advocates investment into SMEs and junior mining exploration to act as a catalyst for a positive shifting the economy. We know that SMEs are a significant source of employment in the economy and provide a plethora of job opportunities and income security for households. This ultimately creates a positive iterative loop in the economy.
QHow do the tax deductions work?
This story is from the April 2018 edition of Entrepreneur Magazine South Africa.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the April 2018 edition of Entrepreneur Magazine South Africa.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Prepare For The Worst
The stronger your business is, the more you stand to lose. Here’s how to spot hidden weaknesses within your operation and steel yourself for unexpected battles.
Start Planning Today For Future Wealth
Q&A Budgeting is by far the biggest threat to wealth planning, says wealth coach Nelisiwe Masango. If you’re part of the majority of people who don’t have a monthly budget or who have one, but don’t adjust it regularly, you could be hindering your financial progress.
Beyond Banal Business Travel
Twenty-five-year-old South African automotive drivetrain repair company Rex Diff and Gearbox found a perfect match for its business travel needs when it joined kulula work’s client base, and never looked back. Dennis McLachlan of RDG’s Consumer Affairs and Marketing division explains why.
The Next Level Beckons
Rudolf Goosen is an ex-professional rugby player, entrepreneur, author, TV presenter and motivational speaker. Entrepreneur recently spoke to him about his new book, Taking Your Life to the Next Level.
Diversity Drives Board Performance
The composition of your board of directors can help you drive your company value and increase shareholder and other stakeholder returns.
Invest And Save 100% Of Your Tax Payable To SARS
Section 12J funds were created in response to the South African Government offering tax incentives for private investors to support funds that support SME growth in South Africa. Three experts unpack the benefits of investing in 12J funds — particularly for high net worth individuals.
Following Your Dreams? Nailed It!
Sorbet franchisee Kate Holahan went from corporate employee in 2015 to owning two franchise locations in just over two years. By September 2017, she had launched a new location, acquired new clients and was learning something new every day. It took a few learning curves and partnering with the right bank to lead her to successfully running her Sorbet and Sorbet Man stores at Benmore Shopping Centre in Sandton.
How To Build A Community Around Your Brand
There’s a way to build your market without spending a fortune on advertising and marketing — and it’s called community building. Here’s why this should be the cornerstone of your growth strategy.
Sealing The Deal
If you want to close more sales, you need to understand the three phases of the customer buying cycle.
No Limits
When Offlimit Communications faced its first downturn after ten profitable years in business, its leadership team didn’t even question that they would turn things around and make them better. With resilience and determination, they analysed the business, made some tough choices and took action. Within six months they took the business from massive losses back to profitability, and a year later doubled their pre-losses turnover — all in the middle of a recession.Here’s how Lisa Cohen, Jerome Cohen and Garon Bloom took lemons and made lemonade, building a R130-million sustainable business in the process.
