In response to the ongoing load-shedding crisis, the government has introduced attractive tax incentives for businesses that invest in solar energy. Starting from 1st March 2023, this solar tax incentive will be applicable, providing substantial benefits for businesses that choose to invest in solar power. Let’s delve into the advantages:
- Financial savings:
- Businesses can reclaim 15% VAT on the total installation charge, subject to a valid VAT invoice.
- An upfront, higher-than-cost deduction of 125% is now available for qualifying renewable energy assets.
- Deduction for initial costs and improvements:The tax deduction applies not only to the initial costs of the renewable energy assets but also extends to any improvements made to them (excluding repairs). This includes enhancements to “foundation” or “supporting structure” deemed integral to the assets.
- Capital allowance over three years:The capital allowance for renewable energy assets is spread over three years, with 50% of the cost claimed in the first year, 30% in the second, and 20% in the third. However, PV solar energy systems not exceeding 1MW enjoy full deductibility in the first year of expenditure.
- Eligibility criteria:Under Section 12B, renewable energy assets must be owned by the taxpayer or acquired through an instalment credit agreement as defined in the Value-added Tax Act. Moreover, these assets must be brought into use as part of the taxpayer’s trade.
By understanding and leveraging these incentives, businesses can make informed decisions about the financial viability of investing in solar power. Additionally, they can accurately calculate the return on investment for solar panel installations while simultaneously reducing their carbon footprint, saving on energy bills, and enhancing their bottom lines.
For further information and an in-depth exploration of these tax incentives, contact our tax specialists for assistance: info@jza.co.za.
This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein.