Good news! You can now claw back the unproductive lost electricity hours due to load shedding. Take advantage of the tax incentives or policies that deal directly with renewable energy, with special mention of solar energy.
The South African government, energy regulator, and Eskom previously attempted to discourage solar use and storage. Subsequent amendment to the Income Tax Act however introduces great incentives for solar power installers. The new policy allows for depreciation in the year of commissioning of the full cost of a grid-tied solar system.
In short, you can now claim back one hundred percent of costs related to your solar installation.
The tax policy that deals with these incentives is set out in s12B(h) of the Income Tax Act, No 58 of 1962. This policy allows taxpayers to deduct the costs of a solar installation from their taxable income. Of course, as always, not everything does count as a deductible expense. The costs you’re able to deduct for are:
- installation planning costs
- panels delivery costs
- installation costs
- installation safety officer costs
Tax Requirements
For taxpayers to qualify for this incentive, one must meet three strict requirements:
- That the plant, machinery, implement, utensil, or article is owned by the relevant taxpayer claiming the deduction, or purchased by it under an instalment credit agreement.
- That such plant and machinery is brought into use for the first time by that taxpayer; and
- That such plant and machinery is utilised by the taxpayer in the course of its trade in the generation of electricity from specific renewable energy resources.
If meeting these requirements, the government has stated that “a taxpayer is allowed a deduction of the costs to the taxpayer of the asset producing the electricity. Where the photovoltaic solar energy system produces less than one megawatt of power, then the taxpayer is allowed a 100% deduction in the first year of use.”
SARS allows 100% of the cost of solar as a tax deduction incurred in the production of taxable income. In other words, only a business generating taxable income can deduct the cost against this income. Also remember that if your business is VAT registered, you can also claim the VAT back. Residential homeowners, unfortunately, cannot take advantage of these benefits, unless running a business from home. With this in mind, if you can save money and make money … going solar has never made more sense.