The S12J investment option gained significant traction during the last few years, among individuals and businesses seeking to reduce their tax liability – and find alternative sources of return in uncertain and volatile markets.
This incentive allowed an investor a 100% deduction against taxable income in the year of investment if that investment was for at least five years. The deduction is set to a maximum investment of R 2 500 000 for individuals and trusts, and R 5 000 000 for companies. To read more about Section 12J click here.
Sadly, this amazing opportunity has always been subject to a sunset clause and as you are most likely aware, National Treasury did not extend the sunset clause. On Wednesday 17 February, the future of Section 12J Venture Capital was decided.
The hope was that the sunset clause would be extended, especially bearing in mind the critical knife-edge on which the post-COVID South African economy finds itself – and the need for job creation and positive investment.
But it was not to be.
This has resulted in June 2021 being the last opportunity to invest and save on your taxable income.
What does the end of S12J mean to me as an investor?
To put your mind at rest, the discontinuation of Section 12J does not affect your prior investments or any investment you wish to make during the 2021 window. The Kalon fund will continue until all assets have been sold and shareholders capital and profits returned.
So, what now? Can I still benefit from S12J investment opportunities?
The simple answer is yes. But time is running out. The Section 12J sunset clause is scheduled to take effect on 30 June 2021. For investors, it means that investments in approved VCCs like Kalon will still be 100% deductible from their taxable income, for the year ended February 2022, but not thereafter.
If you invest now, you will continue to receive the tax benefit on any funds invested in a registered S12J company prior to June 2021, even if the five-year investment period ends after that date.
Now, is the time!
Kalon’s Section 12J disruptive technology fund invests in entrepreneurs solving African problems with the potential to scale into global markets. They focus on providing smart capital, as well as on delivering smart returns supporting entrepreneurs who are disrupting traditional industries.
Kalon seeks out companies with credible teams, high margins, large target addressable markets and unique intellectual property (IP) and assists these companies through hands-on involvement to help build the businesses into assets of value.