One of the main challenges to the growth of small and medium-sized businesses and junior mining exploration is access to equity finance. To assist these sectors in terms of equity finance, the government has implemented a tax incentive for investors in these enterprises through a venture capital company (VCC) regime.
VCCs are intended to be a marketing vehicle that will attract retail investors. An investor is any taxpayer who qualifies to invest in an approved Venture Capital Company. They have the benefit of bringing together small investors as well as concentrating investment expertise in favour of the small business sector. There are no special tax benefits for VCC, only standard tax rules will apply.
From 1 January 2009, investors can claim amounts incurred on acquiring VCC shares as a deduction from income. This deduction will not be subject to recoupment if the VCC shares are held for longer than five years.
A company must meet all of the following preliminary requirements to be able to get an approved VCC:
Please note: Persons who intend to or do make investments into a SARS approved Venture Capital Company, may under no circumstances request a tax directive for purposes of section 12J under paragraph 11 of the Fourth Schedule to the Income Tax Act, in order to reduce his or her tax liability; or accept any advice from persons who indicate that such tax directives may be issued.
The VCC regime is subject to a 12 year sunset clause that ends on 30 June 2021.
Email a completed application form together with supporting documents proving that the preliminary requirements have been met to firstname.lastname@example.org (Venture Capital Companies Office) or send by post to:
SARS Legal Counsel
Legal Advisory: Specialist Support
Venture Capital Companies
Private Bag X170
Assistance with the application can be requested by addressing an email to email@example.com.
Click here to download the application form. You will be contacted once your application has been processed. SARS will assess the application to determine if the company meets the preliminary requirements and if the application is successful, a Venture Capital Company reference number will be given and an approval letter will be sent to the applicant. If the application is not successful, a rejection letter will be sent to the applicant stating the reason(s) for the rejection.
For a list of the approved VCC’s with contact details, click here.
SARS can withdraw the approved VCC status for non-compliance with the following:
SARS will issue a written notification to the VCC stating the requirements that have not been met and provide a grace period for the VCC to meet the requirements. If the approved VCC does not take the acceptable corrective steps within the period specified in the written notice, the approved VCC status will be withdrawn from -
If the approval of a VCC status is withdrawn, an amount equal to 125% of the aggregate amount contributed by the investor(s) in exchange for VCC shares must be included in that VCC’s income in the year of assessment in which such approval has been withdrawn.
If you have any enquiries regarding Venture Capital Companies, you can email us on firstname.lastname@example.org.
Created with the Personal Edition of HelpNDoc: Create help files for the Qt Help Framework