The Silo 12J Fund offers South African individuals, companies and project developers an attractive structure to incentivise investors to invest in their investment opportunity and to potentially enhance their returns through a Section 12J tax incentive.

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The Silo 12J FUND

What is Section 12J?

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Treasury is incentivising South African taxpayers to invest in the local South African economy, via an income tax deduction to their taxable income provided their investments are structured through an approved Section 12J Venture Capital Company (“VCC”).

This incentive is in the form of a reduction of a taxpayer’s taxable income equivalent to the investment amount. The benefit to the investors for making the investment will be a potential boost to the investor’s return on investment, as the Section 12J tax benefit effectively translates into a discount (through a tax deduction) of up to 45% on the investment amount.

Tax Deduction Illustration
DescriptionCorporatesIndividuals/Trusts*
InvestmentR1 000 000R1 000 000
Less: Tax credit (in the tax year in which the investment is made) (R280 000)(R450 000)
Net investment (risk capital)R720 000R550 000
Effective Tax Relief28%45%

*For example, if an individual in the highest tax bracket invests R1 million into The Silo 12J Fund, the individual will receive a tax credit of up to R450 000 at the end of his/her financial year. What this means is that the investor’s risk capital will only be R550 000 and the investor’s return will be based on the full R1 million invested.

Tax Deduction Illustration
DescriptionCorporatesIndividuals/Trusts*
InvestmentR1 000 000R1 000 000
Less: Tax credit (in the tax year in which the investment is made) (R280 000)(R450 000)
Net investment (risk capital)R720 000R550 000
Effective Tax Relief28%45%

*For example, if an individual in the highest tax bracket invests R1 million into The Silo 12J Fund, the individual will receive a tax credit of up to R450 000 at the end of his/her financial year. What this means is that the investor’s risk capital will only be R550 000 and the investor’s return will be based on the full R1 million invested.

What is The Silo 12J Fund?

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The Silo 12J Fund is an approved Section 12J Venture Capital Company which provides entrepreneurs or project developers with an attractive structure that incentivises South African taxpayers to invest indirectly in their opportunities.

The South African taxpayers are incentivised through the tax deduction associated with Section 12J. These taxpayers will have exposure to the entrepreneur’s or project developer’s specific opportunity, though a ring-fenced share in the Silo 12J Fund.

How does The Silo 12J Fund work?

For an illustration on how the Silo 12J Fund works, please see the following steps:

1) The entrepreneur or project developer will present their opportunity to the directors of the Silo 12J Fund.

2) Once approved, the entrepreneur or project developer will reach out to their network and identify investors interested in investing in their opportunity.

3) Once investors have been identified, they will invest into the Silo 12J Fund.

4) The Silo 12J Fund will then issue the investors with a specific class of ring-fenced shares.

5) This specific class of ring-fenced shares will entitle the investors to receive all the economic benefits associated with their investment. In other words, all dividends and capital growth flowing from the investment will flow only to the shareholders of that class of share.

6) The shares issued to the investors will entitle/enable them to reduce their taxable income by the full   amount invested in accordance with Section 12J.

7) The Silo 12J Fund will then invest the funds in the entrepreneur’s or project developer’s specific investment opportunity

The Silo 12J Fund’s directors assist the entrepreneur and the investors through every step of the process.

Click here to understand more about the Silo 12J Fund
Requirements for your investment opportunity/company to raise funding through The Silo 12J Fund

The Silo 12J Fund can be utilised to invest in most sectors, however, the legislation outlines which sectors are prohibited. Accordingly, South African companies and project developers who are looking to raise funding through The Silo 12J Fund, need to ensure that:

  1. Prior to raising funds, the gross asset value of the investment does not exceed R50 million (i.e the investment does not have assets of more than R50 million);
  2. In the case of a mining investment only, prior to raising funds, the gross asset value of the investment does not exceed R500 million (i.e. the investment does not have assets of more than R500 million);
  3. The investment opportunity/company does not earn more than 20% of its income from investments (for example, the investment opportunity/company should not earn more than 20% of its income from dividends);
  4. The investment opportunity/company is registered in South Africa and majority of its trade is in South Africa
  5. The investment opportunity/company does not carry on one of the following “Impermissible Trades”:
    1. Any trade carried in respect of immovable property, other than a trade carried on as a hotel keeper (i.e. an investment in hotels, serviced apartments, and student residences);
    2. Any trade in the financial services sector (for example, banking, insurance, money lending, hire-purchase arrangements, however, this does not prevent a Section 12J VCC from investing in technology within this sector);
    3. Any trade carried on in respect of financial or advisory services, including trade in respect of legal services, tax advisory services, stock broking services, management consulting services, auditing or accounting services; and
    4. Any trade carried on in respect of gambling, liquor, tobacco, arms or ammunition.

Case study

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Thabo is looking to raise R50 million for his macadamia farm in Nelspruit. The R50 million will be used to begin operations and set up the farm for trading. R20 million for the land, R10 million for the macadamia trees, R10 million for the equipment, R5 million for working capital costs & R5 million for the initial costs associated with the first harvest.

Thabo’s investment opportunity complies with the Section 12J requirements and is thus the ideal investment opportunity to utilise The Silo 12J fund to raise the R50 million needed. The Silo 12J Fund will entice the investors to invest in Thabo’s farm with the attractive tax incentive.

The Silo 12J Fund has successfully assisted South African companies and project developers with raising finance across multiple sectors, a few of these sectors include (but not limited to):

Interested?

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Should you be looking to raise funding for an investment opportunity/company and it complies with the above requirements, complete the form below and we will be in contact.

The contents of this website does not constitute and should not be construed as investment, tax, legal, accounting and/or other advice. For advice on these matters consult your preferred advisers about any information contained in this website. The Silo 12J Fund (Pty) Ltd (Reg. No. 2017/279796/07) is an authorised financial services provider – FSP number 48690 and a SARS approved Venture Capital Company – VCC-0077. Terms and Conditions: the investment will be equity in nature and the investor will acquire shares in The Silo 12J Fund (Pty) Ltd which is the SARS approved Venture Capital Company which can provide the Section 12J tax benefit. For more detail about the structure please contact a representative of The Silo 12J Fund (Pty) Ltd. All mentioned returns in this website are estimates and past performance is not an indication of future performance.

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