How South Africa’s Solar Tax Breaks Benefit Homeowners And Businesses

On 1 March 2023, South Africa unveiled new solar incentives allowing homeowners and businesses to benefit from tax rebates on solar panel installations. The latest proposal initially offers these incentives for a limited time of two years, between 1 March 2023 and 28 February 2025.

In this article, we will cover the factors businesses and individuals must consider to take advantage of the tax breaks before proceeding with their solar installations.

What homeowners should know

Homeowners in South Africa are eligible for a tax rebate of 25% of the cost of any new and unused solar panels installed at a private residence with a certificate of electrical compliance. Let’s break down the factors.

Eligibility
To qualify for the tax break, the electrical compliance certificate must have been issued between 1 March 2023 and 29 February 2024.

Limitations
The rebate caps at R15,000 and will not apply to solar panels smaller than 275W. Additionally, the tax breaks will not be granted for other equipment like inverters and generators.

Claim process
Customers wishing to claim the incentive must submit a VAT invoice, proof of payment, and certificate of compliance to the South African Revenue Service (SARS). The rebate is available to the person who pays for the system and not confined to property owners. However, body corporates do not qualify.

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It’s important to note the time lag between the time expenses are incurred and the time the refund is received by the individual, as claims are only possible on submission of the ITR12 annual returns for individuals. Individuals should expect stringent verification and audits by SARS before the rebates are refunded.

What businesses should know

Qualifying companies are set to benefit more from the South African solar tax breaks with the ability to claim a 125% tax rebate on any renewable energy project. The tax breaks will last until 28 February 2025, allowing for two years of benefit.

The section 12B deduction allows for the costs of all PV panels and their constituent parts, including concrete foundations and supporting structures, DC combiner, DC combiner boxes and feeder lines, AC inverters and all equipment including batteries used for electricity generation, racking, cables and wiring for the solar PV system, solar PV site installation planning costs, solar PV panel delivery costs, and costs for solar PV system installation safety officers.

A qualifying business investing R1 million in solar systems could claim a section 12B deduction of R1.25 million. This investment could reduce the income tax liability of the business by nearly R340,000.

With the solar tax breaks being new, it’s challenging to predict the challenges that may emerge. It’s always essential to stay updated on the latest developments, consult industry experts and understand the limitations. While the new solar incentives are most welcome in South Africa, businesses and homeowners ought to tread carefully before proceeding.

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