Section 12J investments have gained significant attention over the last 2-3 years due to their attractive tax benefits. By offering investors a full tax deduction for the amount they invest, section 12J of the Income Tax Act essentially gives investors back their tax money in the year in which the investment is made, and that deduction will be permanent if the investment is held for five years.
At a first glance, this legislation is more beneficial to individuals and trusts than businesses, since they pay higher marginal rates than companies. However, there is another aspect to Section 12J investments that could potentially be of significant value to local companies.
By investing into a correctly structured Section 12J VCC fund, a South African company’s investment will qualify as spending on enterprise and supplier development under the new BEE codes. As such, “Corporate South Africa” could get empowerment credits by using these vehicles.
Having this knowledge, it is hard not to maximise the benefit from ED & SD spend, through investing in correctly structured Section 12J VCC funds. We assist our clients in achieving their enterprise and supplier development (“ESD”) targets in terms of the BEE Codes, through:
- A business who wishes to attain BEE points can use the 12J as conduit between the investor and a 51% Black Owned entity, with less than R50m in annual revenue.
- Points can be recognised for enterprise or supplier development contributions given to entities which are at least 51% black owned, with a turnover under R50million. Contributions can be in the form of grants, loans, equity investments, etc, per Annexe 400B of Code 400.
- The 12J would act as a 3rd party and would direct the investment to a suitable beneficiary. The 12J could have a number of beneficiaries.
- Converting their ED and SD expenditure into a valuable investment
This then becomes a huge benefit to companies who are currently writing off their ED or SD spending as a donation or simply an expense.
- By using a Section 12J vehicle you not only get a tax rebate, but also end up with an investment that can generate returns and become a “pay-back” after 5years….
At WTS we remain firm on our transformation advisory objectives which is aligned to the National Growth Plan and our country’s Vision 2030. In this regard we offer our clients a unique suite of solutions including Economic Transformation Services and ensure compliance, sustainability, spend optimisation and collaboration opportunities which includes beneficiary impact assessments and reporting. We are proud to announce our partnership with nReach One, a duly registered section 12J Fund, which is uniquely positioned to optimize the value we offer to both our Multi-National and local clients.
South Africa has spent over R10 billion on CSI during 2018 alone, however, we have not seen the expected impact and positive results of this allocation.
Contact WTS to find out how we can, together, make a positive, sustainable impact during 2019 and not repeat past mistakes.
For more information, contact:
Tel: +27 (0) 12 003 7009