The VCC regime, introduced in 2009, is subject to a 12-year sunset period that ends on 30 June 2021. The upfront income tax relief will only apply to VCC shares acquired on or before 30 June 2021.
The sunset clause is to be reviewed and may be extended.
As with any other investment, an investment in an S12J company carries risk. It’s important, therefore, for investors to assess the investment strategy of the S12J company that they choose, in order to ensure they fully understand the associated investment risk
Investors need to invest in an approved VCC, such as Optomise. Once the funds are invested, Optomise will issue share certificates to investors in the year in which the investment is received. This will provide SARS with the supporting documents it needs to allow the investor the relevant tax deduction.
After the five year holding period, CGT is payable when investors sell their VCC shares at the rate applicable to the relevant investor.
The investor must invest in the VCC for a minimum of five years to receive the full tax incentive. If the investor disposes of the shares in the VCC before the five-year time period has lapsed, there will be a recoupment of the tax saving (under the general recoupment rules of section 8(4) of the Act)).
The investor receives an immediate tax deduction equal to 100% of the amount invested with no annual limit or lifetime limit. The relief is available provided that the investor subscribes for equity shares, as opposed to buying them over the counter (OTC) from other investors.
Investors invest a sum of money to acquire shares in an approved and registered VCC S12J company. This company, in turn, invests the funds in qualifying investee companies. The S12J company may not invest more than 20% of all investor-acquired funds in any single qualifying investee company, ensuring that the incentive achieves its objective of supporting many privately-owned companies, while concurrently creating a diverse spread of investments to mitigate risk.
S12J companies must be licensed with the Financial Sector Conduct Authority (FSCA)and registered with the South African Revenue Service (SARS). It is recognised best practice for VCC S12J companies to also register with the South African Venture Capital and Private Equity Association (SAVCA)
The legislated limit on the amount of funds that an investor may invest into a S12J fund in a single year is R2.5m for individuals and trusts and R5m for corporate investors.
Any South African taxpayer qualifies to invest in an approved VCC. Optomise offers S12J advisory services and S12 J investment platforms to individuals, trusts and corporates who have large tax liabilities or capital gains on the sale of a business.
Optomise provides investment opportunities into high growth sectors including photovoltaic power (solar) projects, hospitality sector projects, technology and innovation sectors and movable asset.