Anthea Scholtz | GES South Africa Country Leader | GES Advisory Leader | Deloitte Africa | mail me |
Ronel de Kock | Senior Manager | GES Advisory | Deloitte Africa | mail me |
The draft Taxation Laws Amendment Bill, which was issued on 31 July 2023, proposes the introduction of a new rooftop solar energy tax incentive for individuals in an effort to encourage South African households to invest in electricity generation capacity, and by so doing, reduce pressure on the electricity grid.
The proposal provides that an individual may, in determining their liability for normal tax, deduct from that liability, a solar energy tax credit (the tax credit). The tax credit will be equal to 25% of the actual cost of the panels, limited to R15,000.
The tax credit will apply in respect of the costs actually incurred by the individual:
- for the acquisition of any new and unused solar PV panels (the panels), the generation capacity of each being not less than 275W; and
- provided the panels are brought into use for the first time by that individual during the period 1 March 2023 to 29 February 2024.
The tax credit will only be allowed as deduction against the individual’s normal tax liability if:
- the panels are installed and mounted on, or affixed to a residence that is mainly (more than 50%) used for domestic purposes by that individual;
- the installation is connected to the distribution board of such residence; and
- an electrical certificate of compliance issued in terms of the Electrical Installation Regulations, 2009, is issued to the individual in respect of the installation.
The tax credit should apply to all individuals who own, rent or occupy residences provided the above requirements are met.
Where more than one individual actually incurs any cost in respect of the acquisition of a panel, the cost of the panels must be apportioned proportionately for purposes of calculating the amount of the tax credit which each individual qualifies for.
Where before 1 March 2025, a person disposes of a panel that qualified for a tax credit by way of a sale or a donation (other than by way of disposing of the residence to which the panel is affixed), the amount of the tax credit allowed must be deemed to be an additional amount of normal tax payable by that person in the tax year during which the panel is disposed of. There will however be no recoupment of the tax credit if the individual disposes of, or vacates the residence to which the panel is affixed.
No tax credit is also allowed for a panel in respect of which an allowance was already granted under certain provisions in the act.
Effective date: This proposed change will be effective retrospectively from 1 March 2023 and will only be available for a one-year period, from 1 March 2023 to 28 February 2024.
Action required: Individuals who incurred costs to acquire, install and bring into use new as well as unused panels at their domestic residences during the period 1 March 2023 to 28 February 2024, should ensure that they retain records of the actual costs incurred to enable them to claim the tax credit in their 2024 tax returns.
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