South Africa’s New Solar Tax Incentive
Mar 07, 2023 7:01 am
South Africa’s New Solar Tax Incentive Explained
3 min read
On 22 February 2023, the Minister of Finance, Enoch Godongwana, announced a solar panel tax incentive for South Africa. The tax incentive programme will only run for one year (from the 1st of March 2023 to the 29th of February 2024), so as to persuade near term investment. We are hoping that government extends this period for one reason or another.
Government introduces this programme to help foster investment in clean energy among households which will help ease pressure on the grid.
Who can claim the tax rebate?
The tax incentive is only available for individuals who pay personal income tax, as they will then be able to claim the rebate against their tax liability. Businesses already have their own solar tax incentive, which allows them to deduct 100% of the cost of over 3 years.
How much can be claimed?
Individuals can claim up to 25% of the cost of their solar PV panels, but up to a maximum of R15 000 per individual. For example, Jacob buys 10 solar PV panels, at a cost of R4 000 per panel (total cost of R40 000). He would be able to claim 25% of the cost up to R15 000, so R10 000. But Rachel is able to buy 20 panels at a cost of R4 000 per panel (total cost of R80 000). The calculation of 25% adds up to R20 000, but she can only claim R15 000.
How can the incentive be claimed?
One will need:
- VAT invoice specifying the cost of the solar PV panels only, as well as proof of payment.
- Certificate of Compliance verifying that the solar PV panels were used for the first time within the period 1 March 2023 to 29 February 2024.
PAYE taxpayers can claim the rebate on assessment during the 2023/24 filing season, while provisional taxpayers can claim the rebate against provisional and final payments.
What are the requirements?
- Solar PV panels have to be new and unused to qualify and can be part of a new or an existing solar PV system.
- Solar PV panels must have a minimum capacity of 275W per panel.
- Solar PV panels must be fixed. Portable panels do not qualify.
- Batteries, inverters, fittings or diesel generators – and installation costs and other elements of a solar PV system unfortunately do not qualify.
- Solar PV panels have to be installed on a property that is mainly used by an individual/s for domestic purposes.
- Installations must be approved with a certificate of compliance in terms of the Electrical Installations Regulations, 2009.
- Solar PV panels must be part of a system connected to the mains distribution of a private residence.
- Solar PV panels that are first used during the period 1 March 2023 to 29 February 2024.
Why only solar panels?
According to the South African treasury, diesel generators are not a sustainable solution to generating additional electricity as they are often used as emergency back-up options. They also add to fuel demand and have negative environmental impacts. This would detract from the climate objectives that the government is committed to, where fiscal instruments like the carbon tax play an important role.
When it comes to inverters and batteries, treasury argues that they can be used without solar panels – meaning they don’t offer additional capacity to the system. They go on to say that the focus on solar PV panels is to maximise the use of limited government funds to get as much additional generation capacity as possible – and recognises that government will at some point have to introduce at least a partial tax incentive for the other components. This is why installation costs are also not included.
Other useful info
- Both renters and landlords alike can benefit from this tax incentive.
- Body corporates do not qualify for the tax incentive, but individuals living in sectional title homes do, as long as they are allowed to install solar panels on their property.
- Individuals will not have to pay SARS back if they sell the home that they install solar panels on, even if they do so before 29 February 2024.
From what I have been hearing, these incentives face major hurdles for those who actually want to claim them, but because I really want this solar tax incentive to be successful, I am not going to mention them. I will leave a link to the articles explaining these challenges in case you want to go and read about them.
What are your thoughts on the new solar tax incentive? Do you think it will help alleviate SA of our load shedding problems? Share your thoughts by replying to this email!
For more information on solar tax incentives, or any other energy related articles, view the blog posts on my website and be sure to open my weekly emails every Tuesday at 9am CAT.
Articles outlining the problems with the new solar tax incentive:
Warning over rooftop solar tax breaks in South Africa (businesstech.co.za)
Rooftop solar: Taxpayers want clarity on the cost to generate their own power - Moneyweb
Get your load shedding schedules here: Municipal Loadshedding schedules - Distribution (eskom.co.za)
Latest fuel prices: Fuel Pricing - AA
Green energy plans meet resistance in Norway
