GIB logo
Personal
Financial Planning Health and Wellness Private Insurance Private Wealth Retirement
Business
Agriculture Insurance Aviation Insurance Commercial Insurance Corporate Insurance Film and Entertainment Insurance Health and Wellness Marine Insurance Mining Insurance Professionals Renewable Energy Insurance Retirement Fund Services
Destiny Retirement Funds
Why Destiny? Standard Forms Policies Member Benefits Fund Officials Investment Portfolios Destiny Products Important Notices Destiny News
About
Events
Investment Summit 2023 Investment Summit 2024
Blog Contact Register Login



Home / blog /

Section 12J Investment: One last bite of the apple

Published: 03/03/2021
 

Last week Finance Minister Tito Mboweni confirmed that the sunset clause on Section 12J (of the Income Tax Act) investments will not be extended beyond 30 June 2021.

What are Section 12J Investments?

Section 12J of the Income Tax Act refers to the tax deduction allowable to individuals, trusts and companies for investing in SARS approved Venture Capital Companies. It is an incentive to increase access to equity finance for SME's within South Africa and to promote job creation. Investors’ funds must remain invested in the Venture Capital Companies for a minimum of 5 years to avoid the tax refund being recuperated.

What does this mean for you?

Any South African tax-payer can reduce their tax bill by investing in approved Venture Capital Companies.

Individuals and Trusts can contribute up to R2,5m per tax year, while companies can contribute up to R5m per tax year and receive a tax deduction on the full amount.

It is important to note that although Section 12J investments offer an attractive tax incentive upfront, taxes applicable to the investment (dividends, capital gains etc.) are still taxable. Importantly, the base cost utilised for capital gains will be zero.

These are equity investments into a number of typically smaller businesses and an investor should be aware of the risks involved in this asset class. Fund managers do extensive due diligence to ensure the underlying businesses are robust and have a clear path to profitability.

An example:

An individual investor who contributes R1m to a Section 12J investment and holds the equity for five years. Dividends may pay out within the five year period, depending on the investment (this calculation assumes a 7,5% dividend yield for the five year period).

The after tax internal rate of return experienced by the investor would be 16,41%.

The opportunity to make new contributions towards Section 12J investments and receive the tax benefit will end after 30 June 2021. Therefore, if you would like to understand this opportunity deeper and how it would apply to your situation, please reach out to your GIB Wealth Manager.

Financial Planning
Email: finplan@gib.co.za

Watch our discussions with two Section 12J Managers below:

Jaltech Interview
Metta Capital Interview
 
Success is a blend

We grow your wealth by combining active and passive management in an innovative matrix. GIB has been able to continues to deliver while reducing costs and increasing efficiency. Grow you wealth today

Learn more
Personal Services Financial Planning Health and Wellness Private Insurance Private Wealth Retirement
Business Services Agriculture Insurance Aviation Insurance Commercial Insurance Corporate Insurance Film and Entertainment Insurance Health and Wellness Marine Insurance Mining Insurance Professionals Renewable Energy Insurance Retirement Fund Services
Products Destiny Retirement Annuity Destiny Preservation Fund Destiny Living Annuity Destiny Umbrella Fund Destiny Unclaimed Benefits Funds Destiny Tax Free Savings Two-pot Retirement Calculator
More Calculators & Quotes Retirement Calculator Forms Policy Documents Careers Legal Policies & Disclaimers
Get in touch

We only use functional (or required) cookies that are necessary for this site to function, including those that are necessary for Google Analytics to work. In other words, your personal information is not stored in our analytics. Learn more

GIB Holdings (Ltd) Pty Reg. No. 1982/008349/07 GIB Financial Services FSP 9305 | GIB Insurance Brokers FSP 10406 View our policies and disclaimers