The Flyt Hospitality Fund is a property backed section 12J fund, yielding attractive returns for investors.
Watch this video to find out more.
Section 12J of the Income Tax Act was introduced in 2009 by the South African Government 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 and a tax certificate, allowing the invested amount to be deducted from the investor’s taxable income, in the year the investment is made. To date, South Africans have invested over R6 billion into the 12J sector.
Our section 12J fund offers investors excellent returns in the high-growth hospitality industry. The fund, in partnership with a leading 12J specialist, invests in strategically located hospitality properties with a focus on sectional-title serviced apartments and student accommodation.
An investment in Flyt Hospitality Fund is more than just a tax break. We love the 12J incentive because we believe that it is an opportunity to participate in the Government’s policy of job creation, all the while providing our investors with attractive returns and a viable exit strategy. For every R1million invested 4.1 jobs are created. Who wouldn’t want to be part of that growth?
Anuva Investments is one of the country’s first and most established section 12J funds, with an outstanding track record since inception. Anuva is Flyt’s exclusive 12J partner. Together, the two manage the investment process diligently. Anuva manages and administrates the fund itself while Flyt oversees its property assets.
100% of invested amount
Zero during first 5 years
Quarterly after 5-year period
Yes, up to 40% loan
Please download our Private Placement Memorandum for full details on the fund.
FLYT can arrange financing to qualified investors. Please contact us to find out more about this option.
We have a fantastic team of qualified tax practitioners and accountants at hand to assist you. So if you need some tax advice or would like to know exactly how a 12J investment would impact your personal tax refund, please feel free to contact us to setup a free consultation.
Any individual, company or trust can make a 12J investment. Although there is no maximum limit to the value of investments, the 100% tax write off is limited to R2,5m per year for an individual and R5m per year for a company or trust.
Your employer will be deducting your tax each month (PAYE), which is paid directly to SARS. If you invest in our fund then your taxable income is reduced, and SARS will owe you a refund. For example: if you earn R100k per month (R1,2m per year), your annual tax is approx. R395,000. You will get out R1,2m less R395k = R805,000 p.a. after tax (about R67k per month). If you invest R1m into the fund, then your taxable income is reduced by R1m; i.e. it is now R200k. Based on R200k income, your annual tax is now only R22k, but you have in fact already paid R395k! You will therefore get a refund of R395k less R22k = R373k (SARS will pay this back to you directly).
As a provisional tax payer you must pay provisional tax in August and Feb each year. By making a 12J investment, you reduce the income on which your tax is calculated by the value of your investment, and therefore reduce the tax payable. So by investing in 12J you legally avoid having to pay the tax (whereas a salaried earner will receive a refund).
Your refund will be processed by SARS as soon as your tax returns have been filed. This typically takes place in July each year for the previous February tax year end.
Please try our Investment Calculator here or contact us to book an appointment with a tax practitioner.
If you sell your shares in the first 5 years, you will owe SARS the full tax benefit that you received upfront. So whilst it is possible to sell, we strongly discourage this as you lose all the tax benefits.
If you hold your shares after the 5 years, you receive dividends.
If you sell after 5 years, you pay Capital Gains Tax on the full sale amount.
Currently the minimum investment amount is R1 million. However we are in the process of registering a formal Prospectus which will enable us to accept a minimum investment of R50,000 once-off or a monthly amount of R5,000 or more.
“S12J” or “12J” is simply a short reference to Section 12J of the Income Tax Act 58 of 1962 (“The Act”).
“Venture Capital Company” (or “VCC”) is the type of company that is dealt with within this section.
The term Venture Capital Company is, in our view, a bit misleading as our fund is not traditional venture capital as such. However, The Act sets out what a Venture Capital Company is, how it must operate, and that investors who purchase shares are allowed to deduct 100% of their investment. The following SARS handbook is a good resource if you want to read more
The Flyt Hospitality Fund offers investors the ability to earn passive income into perpetuity, i.e. you don’t have to exit after 5 years. However if you want to sell, there are attractive exit options available. You can opt to sell your shares back to the fund or you can choose to take a specific property out of the fund in exchange for your shares.
The fund acquires complete sectional title units within strategically located hospitality properties. The investment mandate is focused on serviced apartments and student accommodation, most notably the Aparthotel developments. Please visit our project page for more information on the specific projects that we have secured for the fund.
Initiation Fee: 2%
Annual Management Fee: 2%
Performance Fee: 10% of declared dividends
We have a minimum criteria of 11% return per annum (based on gross investment amount). This increases up to an estimated 26% per annum based on the net investment amount (after the tax incentive). Remember, the underlying investments are typically “low-risk, medium-return” in nature. The fund acquires sectional title units at a market related price, which will produce a market related income. These are long term, stable investments that produce a sustainable income stream. We are not a high-risk, high-reward fund.
During the first 5 years we bulk-up the fund using some bank debt (40% max). This enhances the returns to investors, but we can’t pay dividends because we use all net income to repay the bank loan. Going into year 6, the loans are repaid and all net income is distributed to investors. This strategy allows is us to boost share value upfront by using the benefits of gearing, then convert to an income fund for the long term.
Ordinary shares are valued at R100.00 each at inception. Every quarter all assets are valued and the share price is adjusted accordingly. New investors may enter the fund at any stage by subscribing for shares at the updated value per share. The value of the share is directly related to the value and performance of the underlying properties.
Currently there is a ‘sunset clause’ that takes effect in July 2021. This means that unless government decide to extend the period, the 12J inventive will fall away as at that date. All existing investments will however remain valid and in place, just new investments will not receive the tax benefit.
Section 12J was written into law and introduced as a provision in the Income Tax Act. Furthermore, our fund is a registered financial services provider (FSP 45663) which means it is regulated by the Financial Services Conduct Authority (FSCA – formerly the FSB). It is also a SARS-approved Venture Capital Company (VCC 008).
Section 12J is similar to the retirement fund contribution, i.e. it is a legislated deduction (it is not a ‘tax structure’.) This means SARS must by law allow the deduction (and must refund any taxpayer who is in credit). The tax certificate that you receive from our fund enables this deduction. All the current investors in Anuva Investements (approximately 85 individuals) have all received their deductions/refunds as expected.
Anuva Investment is the Fund Manager of the Flyt Hospitality 12J Fund. Anuva is one of the country’s first and most-established Section 12J funds, with an outstanding track record since inception. Anuva is Flyt’s exclusive 12J partner.
Flyt is the Asset Manager of the Flyt Hospitality 12J Fund. Flyt is a leading Cape-based property group that develops through joint venture and independent projects.
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