New Solar Tax Incentives for Individuals and Business Owners
In South Africa we currently have two tax incentives programs. One for individuals and their private residence AND one for business owners. In this article we will explain the difference in the two incentives.
A solar panel tax incentive is a program implemented by governments to encourage individuals or businesses to invest in solar energy systems by providing tax benefits. These incentives can take many forms, such as tax credits, rebates, deductions, and exemptions.
Below we layout the tax incentives for individuals and business owners.
1.Individuals (private residence)
- The incentive :
The rooftop solar panel incentives for individuals are in a form of a rebate, calculated at 25% of the costs of new or unused solar panels, to a maximum rebate of R 15,000.
It's important to note that the solar panels must be part of an solar system to be installed at the primary residence.
I do believe that this benefit will not work for everyone, because of the cost of the solar investment.
My calculation is below:
For an individual to use the total tax incentive of R 15,000, you must spend R 60,000 worth of solar panels. If you work on an average of R 2,500 per solar panel, you will have to purchase 24 solar panels to benefit from this maximum cap.
Apart from the solar panels, you must purchase an inverter and batteries to supplement the solar system.
The average home will most likely install between 5 and 10 solar panels, with the cost vary between 12,500 and R 25,000. Their tax rebates for this investment will be R 3,125 to R 6,250.
It’s a wonderful incentive, but not practical, realistic nor affordable for most South Africans.
- How will you receive the tax rebate?
You will be able the rebate on two different ways:
- If you are employed, you will need to claim this in your income tax return for 28/02/2024 (from 01/07/2024)
- Provisional taxpayers (self-employed) will be able to deduct this in their provisional tax returns (Augusts 2023 and February 2024), and final income tax return for the year (from 01/07/2024)
- Important to note, that you must pay income tax in order to receive the income tax rebate.
- What are the requirements?
Only new and unused Solar panel will qualify and can be installed as part of a new installation, or as extension to your current solar system.
Solar panels must have a minimum capacity of 275w per panel.
The solar panels must be installed at a primary residence which is mainly used for domestic purposes.
Installation must accompany a valid COC, to ensure safety compliance.
Solar panels must be part of a solar system that is connected to the residence.
Costs to solar panels will qualify for rebates from 01/03/2023.
2.Busines Solar Invectives
- The incentive :
The initial Section 12B capital allowance makes provision for an accelerated depreciation of 100% of the initial costs in the year the system was brought into use. This incentive has been increased from 01/03/2023 to an accelerated depreciation allowance of 125%.
My calculation is below:
A business that invests R 150,000 in a solar system will be able to deduct the following:
- VAT claimable of 15% on the total invoice for the installation (subject to a valid VAT invoice issued by the supplier)
- Income tax saving of 27% for companies.
- Assuming the R 150,000 is VAT exclusive, that income tax saving will be R 40,500.
- What are the requirements?
There is no limitations to the amount of the investment that can be claimed for income tax purposes.
The deduction will be for the initial costs of the solar system.
