 

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: 

 	* a collective investment scheme which would offer investors Section
42 roll-over relief, thereby differing the exit tax event to a later
date; or
 	* 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
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Jaltech Structuring Pty Ltd · Unit 19 · 1 Melrose Blvd, Birnam ·
Johannesburg, Gauteng 2196 · South Africa 

 