Section 12J (S12J) By Impact Empowerment Ventures Pty Ltd

HOW TO CONVERT YOUR TAXES INTO A LUCRATIVE INVESTMENT

INVEST BEFORE 29 JUNE 2021

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    About Section 12J (S12J) By Impact Empowerment Ventures Pty Ltd

    We at Impact Empowerment Ventures firmly believe that any economic recovery in South Africa will come from Small and Medium-Sized Companies (SMEs). We raise capital and invest it in high-growth, sustainable businesses, which will help to meet the developmental needs of South Africa. 

    One of our primary achievements in 2019, was to come up with appropriate funding solutions, so we could raise vitally needed capital for the sustainable growth of SMEs. Our company’s expertise currently centres on the most appropriate funding model to fund the sustainable growth of SME’s: namely the Section 12J (S12J) tax incentive. 

    Section 12J is a National Treasury-approved tax break, under the Income Tax Act, allowing investors to deduct 100% of their investment from their taxable income in the year of the investment.  S12J benefits can be accessed when investing in our approved investment vehicle.

    We call it – Redemptive Capital. 

    All investments have consequences—not just for individual investors, but also for communities and for the economy at large. In addition to creating financial returns for the investor, investments can create jobs and expand the provision of goods and services.

    They can have positive or negative effects on society and the environment.

    Impact investing goes well beyond just avoiding harm, but also considers Environmental, Social, and Governance (ESG) criteria – the group of standards used by socially-conscious investors to screen investments. It aims to harness the power of investing to improve society, by choosing and managing investments which will have a positive impact.

    Impact investing can be defined as: investments made into companies, organizations, investment vehicles and funds with the intent to secure a measurable positive, social, economic and environmental impact, alongside financial returns.

    We at Impact Empowerment Ventures firmly believe that any economic recovery in South Africa will come from Small and Medium-Sized Companies (SMEs). We raise capital and invest it in high-growth, sustainable businesses, which will help to meet the developmental needs of South Africa.

    Enriching Lives: Enhanced, Risk-controlled Returns. To make a difference in the communities in which we Invest: for Change and Hope.

    Invest before 29 June 2021

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    Qualifying Companies

    Elixir Medicann

    thathomo

    P349 (Pty) Ltd

    Selemo Valley farms

    Ngoye View Agriculture

    VA NKUNA

    VA NKUNA

    UMTHIQUA

    ZEERUST STUDENT ACCOMMODATION

    Commitment To Invest (CTI)

    Requirements for Section 12J
    Minimum amount of taxable income for the year of R1.1 million | Maximum amount for Individuals and trusts is R2.5 million
    Maximum amount for Company investors is R5 million | Have to be invested for 5 years
    May not be breach the “connect person rule” | Can have 2 partners to make up the
    R1 million for individuals

    Once the CTI Form has been completed, we will contact you to discuss details and availability before the CTI is finalised. You will also be required to sign the CTI at our next appointment.

    Should you require URGENT assistance, please contact us on +27 11 480 8634.

    A good news story for Youth Day. Proper housing for students can uplift an entire rural community.

    July 16th 2021, Johannesburg

    “You have probably never heard of Lehurutshe, a small village near Zeerust in the North West Province, which lies close to Botswana

    Border,”  says Chris Hart, Executive Chair of Impact Investment Management.  

    “And that helps to explain the neglect, despair and misery of this and so many other small communities in South Africa.” However, venture capitalist Hart and his team at Impact Empowerment Ventures are bringing new hope to the villagers of Lehurutshe, with a project to build a student accommodation block, using capital that would otherwise have disappeared onto the grasping hands of Treasury officials.

    There will no shortage of demand from the students who are studying at the town’s Taletso TVET College.

    “Generally, these students are currently being accommodated in the back rooms of noisy, crowded homes where it is not

    conducive to study properly,” says Hart, who has just returned from a site visit to Lehurutshe. “There is limited accredited accommodation available for these students, and we are determined to help to fill this gap. “Here we have a situation where there is tertiary education available, but on the accommodation side it is really sub-optimal to learning.” Hart explains that jobs will be provided in the construction stage of the project, staff will be needed to run the student hostel once it is opened, and it will make a real and tangible difference to a neglected backwater.

    “While this investment will help to create jobs, it will also provide business ownership for young unemployed people in this

    community,” he states. This investment is proof that there are plenty of opportunities and need in SA’s neglected rural outposts, and we are providing a facility that will be high-impact, but also highly rewarding for investors. “There are hundreds of these opportunities scattered across South Africa.  From an investment point of view, the rural student accommodation margins look better than those for hostels established near our urban universities.”
    The project is to be financed through the Section 12J tax incentive, which allows people with a high tax burden to put their tax liability into an eligible investment instead of handing it over to the fiscus.
    The project is projected to have a return on investment of 12-15%, net of costs.

    “This is a scalable investment, and the size of the accommodation block will depend on the funds raised.   We plan to house at least 40 to 50 students, but it could go higher,” Hart explains. “And, of course, this model can be planted elsewhere in the country where there is similar demand.

    “We could just say: why should we take any notice at all of this community, and similar neglected rural outposts?    Instead we are asking:  what can an investment do, how can we made a real difference, have a real impact? “The plight of rural villages must be neglected no more.”

    Chris Hart will be hosting a webinar on this student housing project on Friday, the 18th of June at 9.30. 

    Registration Link: https://impact12j.co.za/webinars/zeerust-student-accommodation-s12j-webinar-18-june-930-1000/

    For more information or interview requests, please contact:

    Chris Hart.       Email: s12j@impactinafrica.com Website:  https://impact12j.co.za/

    Press Release | Chris Hart | Business Day | S12j

    Frequently Asked Questions

    What is Section 12J all about?

    Section 12J came into effect in July 2009. Its purpose is to create funding opportunities for the growth of small to medium-sized businesses. Section 12J effectively provides investors in a registered VCC with a taxable deduction of 100% of their investment against their taxable income. This is done to incentivise this investment.

    Although Section 12J has a 12-year sunset clause, this may be subject to review and the incentive might be extended, as we and many others are advocating. If the current incentive does expire, this will not affect investments made before the 30th of June 2021. Any investment after this date (should it not be extended) will not be eligible for S12J support.

    Risks of Section 12J

    There are inherent risks to any investment. Investing in a Venture Capital Company (VCC) is inherently riskier than opting for a listed equity investment. As well as considering the potential rewards, it is important to note the risks associated with a Venture Capital investment.

    Venture Capital Companies are usually young companies and are therefore not yet fully established. This means they carry a higher risk of failure compared to more mature businesses. However, some of this risk is mitigated by the income tax relief which flows from the S12J incentive. In effect, the capital invested is only a percentage of the face value of the investment when one considers the upfront tax deduction. If the qualifying company does not succeed, then the investor will lose their securing deposit as well as any benefits from the diversion of their taxes.

    What protection do I have if the chosen investment is not compliant?

    The protection an investor has against a qualifying company not being compliant is that it cannot operate while it does not comply with S12J requirements. Therefore, it will always need to be compliant and will be monitored and enforced.

    How much do I have to provide to get started?

    You need to pay R25 000 for the securing deposit, will need to fill in the required FICA documents and a Commitment to Invest form.

    Can I invest with a spouse or a partner?

    You can make a Section 12J investment with 2 people. Their combined annual salary must be more than R1.1 million.

    When does Section 12J end?

    The Sunset Clause for Section 12J is the 30th of June 2021, which will mean the end of this incentive.

    Which investors will qualify for Section 12J?

    Any individual, corporate entity or trust which is a registered taxpayer in South Africa automatically qualifies to invest in an approved S12J Venture Capital Company.

    How can the tax deduction be claimed?

    When requested to by the South African Revenue Service (SARS), the investor must verify their claim for a deduction by providing a VCC Investor Certificate that has been issued by an approved VCC. This must state the amount of the investment and the year of assessment in which the investment was made.

    The holding period for a Section 12J investment?

    Current legislation dictates that the shares need to be held for a minimum of five years to avoid an obligation to pay back the tax deduction. In other words, you can claim the tax deduction in the tax year in which the investment was made, but if you sell your shares in a registered and approved VCC before 5 years have elapsed, then you will need to pay over to SARS any deduction that you previously obtained.

    What are the limits of Section 12J?

    There is currently no annual or lifetime limit on how much an individual, trust or company can invest in registered and approved Venture Capital Companies. However, recent changes to the Section 12J legislation have placed a limit on the maximum deduction investors can apply to their taxable income in any one year. This is currently set at R2.5m for individuals and trusts, and R5m for companies.

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