Frequently asked questions
An investor can claim the tax relief by either reducing the estimate of taxable income when submitting provisional tax returns or by obtaining a tax refund through the annual income tax assessment where tax has already been paid.
The Impakt Fund will provide an investor with a share certificate, which may be requested by SARS as evidence of the investor’s investment into a Section 12J company.
Investors will incur recoupment to the extent that they sell their shares in The Impakt Fund within five years of the date of issue of their shares.
What is the annual limit per investor for subscription into Section 12J VCCs?
Treasury recently introduced a cap limiting a taxpayer’s deduction for individual/trust and corporate investors into VCCs, to R 2 500 000 and R 5 000 000 per annum per investor respectively i.e. an investor will only receive a tax benefit on investments into VCCs up to the relevant limits per annum.
In terms of Section 12J of the Income Tax Act, South African taxpayers should be entitled to deduct the full amount of their investment for The Impakt Fund’s Shares from their income in the tax year in which the investment is made (subject to the annual limits discussed above). This tax relief reduces the investment risk and enhances the potential return of the investment in The Impakt Fund’s Shares.
However, the ability of investors to secure tax relief under Section 12J of the Income Tax depends on their particular circumstances. This tax relief is based on current legislation, practice and interpretation. Potential investors should always consult their advisors.
The tax relief can be applied to all forms of taxable income, including salaries, interest income and capital gains.
An investor is permitted to use debt (loans) to make an investment into a Section 12J VCC, provided that the investor is at risk for the loan.
For example, if a taxpayer who financed the purchase of venture capital shares with a loan, disposed of the shares and did not receive any income from the disposal, but was still required to repay the outstanding amount of the loan, the taxpayer would be exposed to financial risk. If the taxpayer was not required to repay the loan, the taxpayer would not be exposed to an economic loss and would not be deemed to be at risk. Any income, such as dividends received or accrued or expected to be received or to accrue from the date the shares were acquired until the hypothetical disposal must be ignored.