Cape-based Flyt Property Investment has recently announced an inventive means for South Africans to take advantage of Government’s Section 12J tax incentive when the chips are down. Flyt Partnership Fund, which is restricted to R300 million, allows investors to take part in the fund on a 100% loan basis. The R300 million has been made available as loan capital to investors to participate as partners in the fund. A minimum investment of R1million is required; however, an investor need only contribute 35% (i.e. R350 000 per R1 million), with Flyt Property Investment contributing the remaining 65% on the investor’s behalf. To add to the offering, Flyt may also extend a loan for the 35% required to qualifying investors.
In essence, investors can make a R1 million Section 12J investment by putting down only R350 000, which will be returned to individuals via their SARS tax refund (subject to investor’s own tax rate). The company has also incorporated a bridging loan facility for qualifying investors who would like to borrow the 35% portion while waiting for the SARS refund.
Comparing South Africa to a global tax haven, Zane De Decker, MD of Flyt Property Investment, describes the opportunity as “a fantastic way to get your tax back via Government’s 12J incentive and invest it into property.” De Decker reports that his team tested the market in with their Partnership product in February 2020 and raised R24m via word of mouth within a few days with investors showing huge interest. “We increased our capacity to provide funding for this product and expect a keen uptake before the SARS Section12J cut-off in July 2021,” he proclaims.
Section12J investments have caught the eye of many South African investors, with government having had to do an about turn and limiting the amount permitted to be invested to R2.5m per annum. Section 12J of the Income Tax Act was introduced in 2009 to encourage South African taxpayers to invest in local companies and receive a 100% tax deduction of the value of their investment. The investor receives a share certificate together with a tax certificate, allowing the invested amount to be deducted from the investor’s taxable income, in the year that the investment is made. To date, South Africans have invested an estimated R10 billion into the 12J sector.
The fund, which is managed by Section12J specialist investment firm Anuva Investments, holds assets in hotel apartment developments or ‘aparthotels’ located in Diep River, Foreshore, Rosebank and City Centre, Cape Town.