South African tax paying individuals, trusts and corporates with an investment horizon of at least five years. Investors that may be seeking to:
- reduce their income tax liability;
- shield against a recent capital gains tax event;
- complement their conventional retirement annuity contributions; or
- diversify into assets with lower correlation to traditional listed market.
Ora Capital is registered with SARS as a Venture Capital Company in terms of Section 12J of the Income Tax Act (Section 12J). This entitles investors to deduct 100% of their investment (capped at an annual allowable deduction of R2.5 million for individuals and trusts and R5 million for corporate investors) in Venture Capital Shares issued against taxable income, providing up to 45% upfront tax relief for individuals and trusts, or 28% for corporate investors. A certificate to substantiate a claim for tax deduction is provided, investors simply quote Ora Capital's reference number when completing their tax returns.
Please note that, as from 1 July 2021, new or additional investments made by investors in a Section 12J company do not qualify for deduction against the investor's taxable income.
Investors should remain invested for a minimum of five years if they wish to avoid a recoupment of the upfront tax deduction claimed. If an investor sells their Section 12J investment within the five years, the upfront tax deduction is recovered under the general recoupment rules of section 8(4) of the Income Tax Act.
Qualifying Shares are equity shares in Qualifying Companies. A Qualifying Company must meet the following Section 12J criteria:
- Is unlisted and a South African tax resident;
- Has less than 70% of its equity shares held, directly or indirectly, by a Venture Capital Company and group companies;
- Does not invest in immovable property (other than a trade carried on as a hotel keeper);
- Trades mainly in South Africa; and
- Does not trade in the financial services, gambling, liquor, tobacco, arms or ammunition industries.
The purpose of the tax benefit is to encourage equity investment in small and medium-sized SA companies. To receive and maintain these tax benefits, the following are some of the major rules of Section 12J that must be adhered to:
- After the expiry of 48 months from the date of the first issue at least 80% of the investments made must have been made to acquire Qualifying Shares in Qualifying Companies (each with a gross asset value below R 50 million at time of investment).
- No more than 20% of any proceeds of issue of Venture Capital Shares may be utilised to acquire Qualifying Shares in any one Qualifying Company.
