The South African Revenue Service (“SARS”) has followed international counterparts in adopting a tax deduction on S12J Investments made in registered Venture Capital Companies, as defined in the Income Tax Act. This deduction has been included under Section 12J of the South African Income Tax Act.
Investors in a Venture Capital Company are allowed to deduct 100% of their capital investment from their taxable income, whether the Investor is an individual, a company or a Trust. As long as the investment is held for a period of 5 years or longer, there is no recoupment from SARS. Recent legislation changes have however limited the deduction to R2.5m for individuals and Trusts and R5m for companies, in any tax year.
Investors in Bright Light Solar VCC will obtain a tax deduction (subject to the maximum allowable deductions above) against taxable income equivalent to their effective tax rate (for individuals in the highest tax bracket, for example, this will be equal to 45% of their investment amount).