Good news: South African Revenue Service (SARS) has created a new asset class for investors to consider, offering tax breaks to the venture capital trusts or companies that fund small businesses! Here's how your business can take advantage of this by investing a little spare cash in a venture capital trust, and another way to put 'trusts' to your advantage when it comes to legally paying over less tax...
It's hardly a surprise that the South African government is doing all it can to bolster enterprise development and job creation as this will greatly boost the economy in the long run.
What is surprising is SARS' latest move in this regard.
See, venture capital companies that fund small businesses are now allowed to trade as trusts, meaning they'll benefit from further tax breaks, says the BusinessDay's BDLive
There's a good precedent for this kind of setup overseas, where venture capital did well during the web revolution.
But don't worry that Africa missed out on the opportunity to get fully involved in the web revolution as Africa's well placed to benefit from the current mobile revolution by helping mobile start-up companies get their feet on the ground.
Here's how your business could benefit from investing in a venture capital company!
But as an investor in the venture capital company, whether you're functioning as an individual, company or trust, you get to write off the value of this type of investment against your taxable income from that year!
For example, this means if you 'earn' R1 million a year and choose to invest R400,000 of this in a venture capital trust, the amount of income you'll be taxed on will be reduced to R600,000, explains the BusinessDay's BDLive
And there's another way to make a business tax-saving by making a wise investment that'll result in your business paying less capital gains tax
Don't forget that your business is exempt from paying over CGT when it invests in one of SA's new real estate investment trusts!
With the new South African real estate investment trust structure, which came into effect on 1 May, businesses can profit from letting a managing company take care of all the logistics of purchasing and selling property on your behalf, without the worry of paying capital gains tax
on any profit from the sale of property, says the Business Report.
This means your business will in turn be exempt from paying securities transfer tax on buying or selling any of these South African real estate investment trust shares.
So you won't face the 'double taxation' headache if your business invests in a real estate investment trust – do your research and invest in one today, says FSPBusiness
These two trust types offer great new ways to boost your business' bottom line without any added tax hassle!