SARS TAX INCENTIVE FOR SOLAR POWER
IS SARS POWERING ADOPTION?
As from 1 March 2023 through to 28 February 2025, Section 12B of the Income Tax Act (South Africa) was amended by SARS from a one-year accelerated depreciation allowance on renewable energy to include an additional 25% rebate on the cost of renewable energy assets.
Under the expanded incentive, businesses will be able to claim a 125 percent deduction in the first year for all renewable energy projects with no thresholds on generation capacity. The adjusted incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025.
For a business with positive taxable income, the deduction will reduce its tax liability to SARS. For example, a renewable energy investment of R1 million would qualify for a deduction of R1.25 million. Using the current corporate tax rate, this deduction could reduce the corporate income tax liability of a company by R337 500 in the first year of operation.
In addition to the expanded incentive for businesses, a Rooftop solar tax incentive has been implemented for individual taxpayers.
To increase electricity generation, the government is also proposing a rooftop solar incentive for individuals to invest in solar PV. Individuals will be able to receive a tax rebate from SARS to the value of 25 percent of the cost of any new and unused solar PV panels.
To qualify, the solar panels must be purchased and installed at a private residence, and a certificate of compliance for the installation must be issued from 1 March 2023 to 29 February 2024.
The rebate is only available for solar PV panels, and not inverters or batteries, to focus on the promotion of additional generation. It can be used to offset the individual’s personal income tax liability to SARS for the 2023/24 tax year up to a maximum of R15 000 per individual.
For example, an individual who purchases 10 solar panels at a cost of R40 000 can reduce their personal income tax liability for the 2023/24 tax year by R10 000.
With these incentives, it makes the financial models of home and commercial roof-top, grid-tied, solar power system look very attractive.
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