Estate Living Magazine Invest SA - Issue 45 September 2019 | Page 41

I N V E S T
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D E V E L O P
much higher risk factor, but they generate a higher return. The risk,
however, is significantly reduced through the upfront tax deduction,
which would offset poor returns. A minimum investment is usually
upward of R100,000 (specific to each company) and will need to be
held for at least five years to receive the 12J tax deduction. 
Section 12J VCCs are excellent vehicles for assisting developers
and companies in raising finance for their projects. Section 12J
VC companies cannot invest in immovable property except in
the hospitality industry, so projects are limited to hotels, serviced
apartments, student residences and mixed-use developments that
include a hospitality aspect.
This veers off the traditional process of selling off units at discounted
prices in order to raise capital, although this may still be done. Of
course, Section 12J VC companies are not limited to just the property
sector. Other great opportunities to expand their investments to other
Potential benefit to developers
As an example, an individual investor in the highest tax bracket invests
R1 million into an approved venture capital company (VCC). The
investor will receive a tax credit of up to R450,000 at the end of the
financial year. What this means is that an investor will have 100% of
their investment working for them, but only have risk exposure on
55% of their original investment amount.