One of the main challenges to the economic growth of small and medium-sized businesses is access to equity finance. To assist these sectors in terms of equity finance, government has implemented a tax incentive for investors in such enterprises through the Venture Capital Company (VCC) regime.
How does this affect the Investor in Decentral Energy Capital Limited?
The full amount invested in Decentral Energy is 100% deductible from your income in the year in which the investment is made. This applies to individuals, companies and trusts.
An investor in Decentral Energy will therefore obtain a 45 % tax incentive (for an individual tax payer at maximum marginal rate) at the time of investment. Companies qualify for a 28% tax incentive/
If the investment in Decentral Energy is held for a minimum of 5 years the tax benefit conferred at the date of investment will become permanent, i.e. no recoupment of the tax benefit in the hands of the investor when the investment in the Decentral Energy is subsequently realised.
Decentral Energy is able to invest in companies with total assets up to R50 million.
An overview of how it works
Qualifying Investors will invest in approved VCC’s in exchange for the issue of Venture Capital Shares and investor certificates. Investors can claim tax deductions in respect of their investments in an approved VCC. The approved VCC will, in turn, invest in qualifying investee companies in exchange for qualifying shares.
An investor in Decentral Energy will obtain a 45 % tax incentive (for an individual tax payer at maximum marginal rate) at the time of investment.
There is no recoupment of tax incentive at the time of realisation of investment in Decentral Energy if the investment is held for a minimum period by the investor of 5 years.
For more information: SARS: http://www.sars.gov.za/ClientSegments/Businesses/Pages/Venture-Capital-Companies.aspx