In an effort to boost equity funding for SMEs, the government introduced section 12J to the Income Tax Act."SMEs are the lifeblood of the economy. They stimulate growth and are the most prolific employers on a rand-for-rand basis," says James Twidale, director and portfolio manager at Virtuosity Capital. "Offering an incentive to help boost this sector is fantastic for both the economy and investors."Since 2009, retail investors, trusts and companies can deduct from their taxable income the full amount invested via a venture capital company (VCC) that is registered with the SA Revenue Service (Sars). The invested amount will only attract capital gains or dividends tax once returns are realised.The VCC, which must be a resident of SA, then manages the fund and makes investments in qualifying SMEs. "After a slow start, the number of Sars-approved VCCs increased significantly in 2015 following minor legislative amendments that made these investments more attractive to investors and inv...

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