About 12 (J) – 12 (J) Fund
About 12 (J)
12 (J) fund
A major challenge to economic growth of small and medium-sized businesses and junior mining exploration is access to equity finance. SARS has implemented a tax incentive for investors through section 12(J) of the Income Tax Act, 1962 (Act No. 58 of 1962).
The 12(J) fund must meet all of the following preliminary requirements to qualify for an approved 12(J) fund status for each year of assessment:
- The company must be a resident
- The sole object of the company must be the management of investments in qualifying companies
- The company’s tax affairs must be in order
- The company must be licensed in terms of section 7 of the Financial Advisory and Intermediary Services Act, 2002
The 12(J) fund must satisfy the following requirements by the end of each year of assessment after the expiry of 36 months from the first date of issue of the 12(J) fund shares:
- A minimum of 80% of the expenditure incurred by the 12(J) fund to acquire assets must be for qualifying shares, and each investee company must, immediately after the issuing of the qualifying shares, hold assets with a book value not exceeding:
- R500 million in any junior mining company;
- R50 million in any other qualifying company
- The expenditure incurred by the 12(J) fund to acquire qualifying shares in any one qualifying company must not exceed 20% of any amounts received in respect of the issue of fund shares.
A maximum of 70% of the equity in a qualifying company can be held by the 12(J) fund.