** Section 12J Exit: Section 42 roll-over relief vs Section 12B solar
investment
------------------------------------------------------------ A common
tax question which we are currently being asked by exiting Section 12J
investors is which option is more appropriate to mitigate the Section
12J exit tax, namely, an investment in: 1. a collective investment
scheme which would offer investors Section 42 roll-over relief,
thereby differing the exit tax event to a later date; or 2. a Section
12B solar investment which shields the tax consequence. The choice
between these options hinges on the investor's objectives. If the
primary goal is to mitigate the Section 12J exit tax, then a Section
12B investment generally emerges as the preferred route. This
preference stems from the fact that opting for a Section 12B
investment typically entails parting with only around 21% of the
Section 12J capital to reduce the tax liability to zero. In contrast,
a Section 42 investment necessitates committing 100% of the
investor’s capital to defer the Section 12J exit tax. – see the
calculation below. However, if the motivation for the new investment
is solely driven by returns, then it could be argued that a Section
12B investment offers flexibility. The reason is that a Section 12B
investment which is geared conservatively, allows an investor to
receive an amount of up to 90% of their investment back in the first
year through SARS refunds and cash inflows. This in turn will allow
the investor to invest the proceeds less the Section 12J exit tax into
the collective investment scheme or an alternative investment. **
Comparative Analysis
------------------------------------------------------------ Here is a
comparison of three options: exiting a Section 12J investment,
allocating a portion of the capital to Jaltech’s geared Section 12B
investment, and making use of Section 42 roll over relief. Thankfully,
investors who have already chosen the Section 42 route have the option
to exit the structure and redirect their capital towards a Section 12B
investment. It's crucial for investors to act promptly because the
Section 12B deduction mandates that the capital must be invested in
energy-producing solar assets within this fiscal year. Failure to do
so would restrict the deductibility of the investment based on the
amount effectively deployed. ** Jaltech’s Section 12B Solar
Investment IV
------------------------------------------------------------ Jaltech
is offering taxpayers the opportunity to invest in its fourth Section
12B solar investment and receive up to 90% of their investment back
within the first year through SARS refunds and cash inflows. This
investment will close at the end of May. Section 12B Solar Investment
IV
(https://jaltech.co.za/portfolio_type/jaltechs-tax-deductible-solar-investment/?utm_source=Jaltech+Master&utm_campaign=dd51a8ea35-IFA+Section+12J+Exit+02%2F05%2F24&utm_medium=email&utm_term=0_-dd51a8ea35-%5BLIST_EMAIL_ID%5D)
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Johannesburg, Gauteng 2196 . South Africa