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The following incentives are available :

(a) Venture Capital Companies Investing In Venture Companies:
Venture Capital Companies (VCC) investing in venture companies are given full tax exemption on all sources of income for 10 years of assessment or the years of assessment equivalent to the life span of the fund (if any) established for the purpose of investing in the venture company whichever is the lesser. Where a VCC incurs a loss from the disposal of shares in a venture company in the basis period for any year of assessment within the exempt period, such losses shall be carried forward to the post-exempt period.
Conditions to qualify for the exemption :

• at least 70% of the funds be invested in venture companies in the form of seed capital, start-up or early stage financing; and

• VCC should not invest in a venture company which is its related company at the point of first investments.

VCC must obtain annual certification from the Securities Commission that the conditions imposed for the incentives have been complied. The letter of certification must be attached with the income tax return form for submission to the Inland Revenue Board. This incentive is effective from the year of assessment 2000 in respect of the basis period ending in the year 2000.

(b) Companies or Individuals Investing In Venture Companies

A company or an individual having a business source, having invested in a venture company at start-up, seed capital and early stage financing are entitled to a deduction from the adjusted income equivalent to the value of the investment made in the venture company. If the company or individual does not have sufficient adjusted income to offset the investment, the deductions will be allowed to be carried forward.

Conditions to qualify for the deduction :

• the investment in a venture company is in the form of the holding of shares which at the point of acquisition are not listed for quotation in the official list of a stock exchange;
• VCC should not invest in a venture company which is its related company at the point of first investments;
• the company or the individual has not disposed its shares in a venture company prior to its listing on the official list of a stock exchange.

A company or an individual must obtain annual certification from the Securities Commission that the conditions imposed for the incentives have been complied. The letter of certification must be attached with the income tax return form for submission to the Inland Revenue Board. This incentive is effective from the year of assessment 2001. For a company the incentive 9(i) and (ii) are mutually exclusive.

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