Section 12J is an investment tax incentive designed to encourage investment into a range of private companies which meet defined criteria including hospitality properties and certain qualifying student accommodation and moveable asset rental businesses. The incentive gives taxpayers the ability to write off 100% of their investment against their taxable income.
Investors therefore benefit from up to 45%* immediate tax relief, reducing the cost of the investment, providing downside protection and enhancing overall returns. (*assuming a max. tax rate of 45% for individual investors).
To learn more about Section 12J, click here for SARS's External Guide.
Which Properties qualify for Section 12J?
Section 12J is very attractive if you are looking to acquire or develop a hotel, lodge, student residence or serviced apartments. Effectively, Section 12J can provide enhanced returns due to the tax deduction of between 28% to 45% on your investment into opportunities that fall within the Act’s definition of “hotel keeper”.
Section 1 of the Income Tax Act which defines a “hotel keeper” as:
“any person carrying on the business of hotel keeper or boarding or lodging house keeper where meals and sleeping accommodation are supplied to others for money or its equivalent”.
Taking into consideration the above as well as a binding private ruling issued by the South African Revenue Service, a “hotel keeper” must:
If structured correctly, the following hospitality property investments opportunities can attract the tax deduction associated with Section 12J:
TERMS AND CONDITIONS (1) Invest Shariah 12J Fund (Pty) Ltd (in the process of being renamed from Prudential Shariah S12J Investment Fund) (company registration number: 2016/458652/07) is: (a) A Shariah Compliant investment product; and (b) A registered and authorised financial service provider (FSP registration number 47715); and (c) A registered Section 12J Venture Capital Company (SARS registration number VCC-0054). (2) DISCLAIMER: The content provided on this website does not constitute as solicitation, guidance, proposal, invitation or investment recommendation or advice, and prior to considering such an investment, we recommend prospective investors seek specialised financial, legal and tax advice. (3) Please further note that an investment in the Invest Shariah 12J Fund is by invitation only and not available as an offer to the public, with a minimum investment requirement of R1 million per investor. To enquire about investments, and see if you qualify, please complete the contact us form on our website and we will put you in touch with one of our senior executive and FCSA registered representatives. (4) All potential benefits and savings referred to on this website relate to a potential income tax saving should the investors deduct their full investments for income tax purposes in accordance with section 12J of the Income Tax act, assuming the client is in the highest tax bracket of 45% for individuals and trusts and 28% for companies (being their assumed effective tax rate saving), and assuming the investment is made in qualifying entities and the Investor qualifies for the tax benefit.