Section 12J of the Income Tax Act has become an increasing buzz investment in recent times.
After investing in retirement annuities and pension funds, Section 12J is an ideal way to significantly reduce an individual’s tax liability.
The tax incentive was initially set up in 2009 to encourage job creation, small business development and economic growth.
An investment in a venture capital company, or group of companies, will be tax deductible if such company or companies are approved by SARS.
The Section 12J opportunity has introduced an exciting new asset class, which has now started to attract a significant amount of money in a fairly short period of time.
However, as there are a number of options in this sphere, it is important to look at this carefully as an investment and not just as a tax deduction.
Investors will need to be aware of the parameters involved in 12J investments; that a significant minimum investment is required – R500 000 to R1 000 000, depending on the scheme, as well as the 5 year minimum investment period.
In the coming months, Maximus will be looking closely at the merits and any demerits of these investments and especially what role they can play in our clients’ personal financial planning. Moreover, as with any scheme involving tax relief it is inevitably open to abuse. Consequently it will be interesting to see if SARS attitude towards 12J changes at all in the foreseeable future.
- 8 Mar, 2019