In a country where sadly all too often hard-earned taxpayer money is often wasted or stolen through corruption, it would not be surprising for taxpayers to want to withhold their tax contribution. Thankfully, this is not the case in South Africa, as there is still an overwhelming desire amongst citizens to building the country and a commitment to helping it improve and grow.
It is for this reason that the section 12J investment incentive has proven to be so immensely popular amongst taxpayers since its inception — it has allowed South Africans to substantially cut down their income tax bills while still contributing to economic growth and job creation. This creates a win-win scenario for the country and for the individual taxpayer. Unfortunately for taxpayers and the economy, however, time to benefit from the incentive has almost run out.
Section 12J was enacted to encourage taxpayers to invest in local SMMEs in specific growth-targeted industries, such as hospitality and tourism, agriculture, energy, student accommodation and manufacturing. Taxpayers were encouraged to make such investments through the ability to claim a tax deduction to the extent of their investment. This offered clear economic benefits in terms of contributing to growth and jobs, while offering up to a R2.5 million yearly tax saving for individuals and R5 million for companies. These investments were locked into the local economy for a minimum of five years, allowing sustainable growth in the underlying investee company — and returns on the taxpayer’s investment.
In the 2021 National Budget, Minister Mboweni’s announced that Section 12J of the Income Tax Act would come to an end on 30 June 2021. This is highly unfortunate, considering that the Section 12J incentive created 8 239 jobs in a remarkably short space of time, and even during a recession.
South African taxpayers now have little over a month left to claim the immense benefits that section 12J has to offer: a sustainable long-term investment in a growth-driving company that is also a tax saving. Taxpayers are getting up to R1 of value for every 55c they invest in a 12J fund through the tax deduction alone, before growth in the investee company is even taken into account. Such a remarkable tax benefit will probably not be seen again in South Africa for a long time.
Since Section 12J’s inception, Grovest has been the industry-leader in facilitating taxpayer’s investments under the legislation. As Section 12J draws to a close, Grovest has committed itself to facilitating taxpayers’ access to this excellent incentive, offering them huge savings on their tax bills while still allowing them to help build South Africa and improve the lives of our people.