Frequently Asked Questions
Yes, this is an exciting opportunity for ANY South African taxpayer
Is this a legal way to reduce the amount of tax that I pay?
Yes, this is set up by SARS in accordance with Section 12J of Income Tax Act No. 58 of 1962 that was created specifically to encourage taxpayers to invest in small and medium sized enterprises in the RSA.
Yes, you save up to 45% in marginal taxes, the underlying investments need to maintain their value for you to realize savings. You can also realize good and exiting growth on top of the savings.
Yes, you can speak directly to the South African Revenue Service
Eridanus only invests in asset backed investments, meaning for any investment made an investment is made by Eridanus into an asset. All investment decisions are governed by an investment committee to ensure that the investment risk is minimized
The best reasons would be that Eridanus only invests in asset backed investments, the managing company has a 10 year track record with proven results, the other shares of the qualifying investment companies are held by the operators that have been managing these companies for 10 years or longer sharing in the investment returns and thus incentivized to protect - and to make the investments grow.
Yes, in the form of the qualifying investment companies being active for 10 years or longer
An investment in Eridanus as a normal tax payer in the upper tax bracket in 2019 of around R1 mil will give you estimated returns in the form of dividends of approximately R70,000 for the first year, R450,000 in immediate tax savings, and R10,000 in capital growth for the first year. Refer to the PPM for a detailed discussion and breakdown.
The tax saving will be a deduction from taxable income within the year that the investment into the VCC was made. To illustrate – if an investor invests on or before the 29th of February 2020, then the tax deduction will be included in the investor’s February 2020 income tax return.
Thus immediately after investing Eridanus will issue the investor with a S12J investment certificate, the investor will give this certificate to SARS, and SARS will decrease the investors taxable income with this investment amount and then do a refund if a refund is applicable.
The investment will need to be within the financial year end of the year in which the investor requires the tax deduction. If an investor invests on the 28th of February 2020 then the tax deduction will be included in the investor’s 2020 income tax return, however if an investor invests on the 1st of March 2020 then the tax deduction will be included in the investor’s 2021 income tax retun.
Yes, the VCC shares may be sold in accordance with the Company’s MOI. There are, however, tax advantages to holding onto your shares for more than 5 years – i.e. no tax recoupment.
Eridanus employs the management team and the net costs per its annual budget will be capped at 2% (two percent) per year of the Total paid in equity from time to time.
Eridanus’ management team will also be entitled to receive a performance fee of 10%/20% of the dividend paid out if the individual qualifying assets dividends paid to Eridanus is in excess of 15%, this will be on a sliding scale; if die dividend from the qualifying asset received by Eridanus is between 15% and 20% the performance fee will be 10%, if the dividend from the qualifying asset received by Eridanus is above 20% the performance fee would be 20% of the dividend received by Eridanus. Other VCC entities will also ask a capital raising fee of eg. 1%, Eridanus does not ask investors any capital raising fee.
The management team of Eridanus will be entitled to receive 20% of the nett increase in the value of the qualifying assets upon realization.
- FSCA (48947)
- SARS (VCC no: 0085)
- Board of directors
- A Compliance officer
- Independent auditors
The minimum investment Eridanus has agreed to is R 100 000 (One hundred thousand Rand).
The National Treasury published the draft Taxation Laws Amendment Bill for comment on 21 July 2019 in this Bill it is suggested that the maximum investment into a S12J VCC for an investors taxable year of assessment may not exceed R2.5 mil.