Section 12 J is subject to the provisions of the Income Tax Act No. 58 of 1962 (the Act). Section 12 J came into effect on the 1st of July 2009. It was
introduced specifically for the purpose of inviting investors to participate in the capitalisation of promising small and medium size qualified enterprises in the Republic of South Africa and to cater for the deduction on the monies spend in exchange for the issue of Venture Capital Company shares (“VCC”).
WHO QUALIFIES TO BE AN INVESTOR?
“In terms of Section 12 J, any South African tax resident that invests in a venture capital company (VCC), approved and registered in terms of Section 12 J”. The tax deduction is available to all taxpayers, including individuals and all legal entities (companies, trusts, etc.)
HOW IT WORKS?
Taxpayers who invest in a VCC, through the acquisition of shares in the VCC, are entitled to a 100% tax deduction on monies invested, subject to the provisions of Section 12 J, thereby receiving a tax credit of up to 45% on their investment.
THEREFORE SECTION 12 J IN PRACTICE
• Investors will acquire shares in a VCC
• The VCC will provide the investor with a certificate which will allow the investor to claim the full tax deduction, on expenditure incurred in acquiring the VCC shares. (The investment will need to be within the tax financial year end of the year in which the investor requires the tax deduction.)
• The VCC will, in turn, invest and acquire shares in qualifying companies.
WHO WILL MANAGE THE VARIOUS ASPECTS OF THE VCC?
All FSCA statutory requirements will be managed by the Key Individual.
Qualifying company’s performance:
The VCC, Titanium VC One Limited
The company will be managed by the Board of Directors.