An investment in a Section 12J Venture Capital Company (VCC) allows an investor to deduct 100% of their investment from their taxable income. This applies to all South African registered taxpayers, including companies, trusts and individuals.
This tax benefit effectively gives the investor only 55% risk in the investment with 100% of the upside.
The tax benefit effectively adjusts the risk in investing in early stage, or venture capital companies. In order to receive these tax benefits, an investor must invest in a registered Venture Capital Company registered with SARS.
An investor may deduct 100% of the investment from his taxable income in the year in which the investment was made in order to receive the tax benefit.
The Venture Capital structure has been utilized in the United Kingdom for many years. This concept has been adopted by SARS, which allows similar tax benefits, and allows investors a 100% tax write off of their investment from their taxable income. This type of tax benefit has assisted the growth of Venture Capital throughout the world.
Grovest , is supportive of these tax incentives and are extremely positive that these tax benefits will encourage and make a huge difference to the Venture Capital Eco system in South Africa.
Investors into the fund, will receive a Section 12J tax certificate, which confirms that the tax benefit of the full amount of the investment may be deducted from their taxable income. No taxpayer may claim this Section 12J tax benefit without it being issued by a registered Section 12J company.