What Is A Section 12J VCC?
A Section 12J Venture Capital Company (VCC) is a South African Income Tax Act approved innovative tax saving vehicle registered as a Collective Investment Scheme (CIS) that allows you to invest in Small and Medium Enterprises (SMEs) and receive substantial income tax deductions.
Benefits of a Section 12J VCC
- Tax Savings: Section 12J offers you the opportunity to invest in South African-based SMEs and receive up to 45% tax deductions in the year of investment.
- Diversified Portfolio: You will be able to create a diversified portfolio of investments and spread your risk.
- Tax-Free Returns: The returns generated from your investments in a Section 12J VCC are exempt from Dividend Withholding Tax (DWT).
- Flexible Investing: As a Section 12J investor, you can decide how much you want to invest and when you want to invest and you can exit after 3 years.
How Does it Work?
A Section 12J VCC works by investing in SMEs in South Africa in specific industries including technology, hospitality and tourism, commercial agriculture, manufacturing and financial services. The VCC collects the investments of its members and distributes these funds to SMEs in South Africa. The VCC then holds the bloodstock in the SMEs for a specified period of time. This means you receive an ownership stake in the business.
The tax benefit of investing in a Section 12J VCC is that you can claim a deduction equal to 100% of the amount you invested in the VCC for tax year in which you made the investment. This means that you will receive a tax savings of up to 45%.
Section 12J VCCs are an innovative way to invest in South African businesses and receive tax savings. By investing in a Section 12J VCC, you can create a diversified portfolio of investments, receive tax-free returns and enjoy the flexibility of investing.