12J companies
Higher tax, not all bad
An unintended consequence could be significantly more money flowing into venture capital, writes Johann Barnard
High income earners would have groaned in February when finance minister Pravin Gordhan announced the latest increase in personal tax to 45% for individuals earning more than R1,5m/year. An unintended consequence of this hike could be that significantly more money flows into the venture capital market. This possibility, and opportunity, exists due to section 12J of the Income Tax Act, which allows for a tax deductible investment into venture capital (VC) companies approved by Sars to operate these funds.
Westbrooke Capital Management says it has grown investment in its funds by R415m in the past year to reach a total R875m from about 320 investors. Most are individuals, though it has attracted money from corporates and trusts. "As South Africans seek ways of reducing their tax bill, this is likely to have a positive effect on the industry," says Westbrooke fund manager Richard Asherson. "However, this may be mitigated by the increase in both capital gains tax (due to the incre...
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