Switched On About Solar And Tax

There’s not much we need to tell you about ongoing load-shedding that you don’t already know. But at Nolands what we do know about is tax. And we can tell you that when it comes to solar and SARS, there’s some sort of light relief on the horizon.

As outlined by the Minister of Finance in his budget speech on February 22nd, 2023, this light comes in the form of a tax incentive and in these dark times, the last two words are enough to make anyone keep reading!

Rooftop solar tax incentive for individuals in domestic residences (Section 6C rebate)

Make sure you’re switched on when it comes to claiming for your solar installation, as there’s quite a bit you can get back.

Who, what, how?

• Individuals can claim 25% of new and unused solar photovoltaic (PV) panels installed.
• The rebate is capped at R15 000 per individual and is only available for the 2024 tax year.
• The rebate will be deducted from normal tax payable on assessment.
• The incentive is for individuals that pay for the panels. If more than one person pays for the panels, the rebate will be split according to the individual contributions. This means that property owners and tenants are eligible, as long as the individual pays for the panels and installation and meets the Ts and Cs below.

The Ts and Cs

• Panels must be new and unused.
• Panels must be bought and paid for by the taxpayer.
• Panels must be used for the first time between 1 March 2023 and 29 February 2024.
• Panels must have a minimum capacity of 275W per panel.
• Panels must be installed in a residence that the taxpayer mainly uses for domestic purposes.
• Panels must be connected to the distribution board of the home.
• Inverters, batteries, and other components aren’t eligible for the rebate.
• After installation, an electrical certificate of compliance must be issued to the owner/taxpayer in terms of the Electrical Installation Regulations of 2009.
• When the property gets sold and the panels remain affixed to the house, there’s no recoupment of the rebate. But, if the panels are sold separately from the residence, the rebate will be recouped and treated as an amount of tax payable by the individual.

Solar tax incentive for business taxpayers (Section 12B/12BA deduction)

The minister also announced that business and individual investors in renewable energy projects are eligible for tax advantages through the proposed insertion of a new section – 12BA.

In the know

• If the proposal goes through, taxpayers will be eligible for an increased tax deduction – previously 100%, now 125%, and this will apply to the cost of any new or unused machinery, plant, implement, utensil, or articles.
• The above items must be brought into use between 1st March 2023 and 28th February 2025.
• The machinery, plant, implement etc. must be used to generate electricity from:
  • Wind power
  • Photovoltaic solar energy
  • Concentrated solar energy
  • Hydropower
  • Biomass compromising organic wastes, landfill gas or plant material.
• The qualifying cost and size of these investments won’t be capped (previously the deduction was only allowed on PV projects below 1 MW). One can claim for the cost of solar installations, inverters, wiring, specifically designed foundations/supporting structures, and the like, which are required to connect the solar panels to the grid. SARS historically excluded batteries as these were seen as separate from the renewable energy generation equipment. SARS issued a binding ruling in this regard; however, a taxpayer could apply for a separate ruling and request SARS to allow the batteries.
• The new proposed section also allows an allowance of 125% on any new or unused machinery, plant, implement, utensil, or articles owned by the taxpayer as purchased in terms of an instalment credit agreement, as long as this falls into the period 1st March 2023 and 28th February 2025.
• The draft of the proposed Section 12BA has been made available for public discussion before being finalised when the minister presents the tax bills during the medium-term budget policy statement.

Top tip

Make sure you meet ALL the necessary requirements before claiming any of the allowances. This way, you’ll avoid SARS disallowing claims or levying penalties and interest on the resultant understatement of tax due.

Here to help

If you’re still feeling a little in the dark, or would like further information, please get in touch. We’re more than happy to be of assistance. Please contact either Kobie Stears (kobies@nolandsjhb.co.za) or Evan Schutte (evans@nolandstax.co.za).