Are you thinking about investing in solar panels to produce electricity at your home or office? Well, the whole world is shifting towards renewable energy sources like solar power for electricity production. Therefore, the South African government is adamant about adopting solar energy and encourages citizens to go for it.
One way the government motivates people to invest in solar PV is through SARS solar rebate. Individuals and businesses will be able to receive a tax rebate from SARS on any new and unused solar PV panels. So, let me explain in detail how to claim solar rebates, tax incentives, and SARS section 12b allowance.
Solar Tax Incentive South Africa
People are more drawn towards solar power nowadays as it is an investment that can get rid of the electricity bills for good. Moreover, in 2020 more than 115 gigawatts of solar panels were installed worldwide. This huge shift towards renewable power adoption is due to its environmental and economic benefits.
The South African government aims to reduce the country’s carbon footprint and cope with the energy crisis. Therefore, they introduced tax incentives for renewable energy in South Africa. The South African Revenue Service (SARS) launched a solar rebate system that will give tax incentives or reward individuals or businesses for investing in solar photovoltaic panels on their property.
How Does the SARS Solar Rebate Work?
The SARS solar rebate works; if you are eligible and install solar PV panels at your house or your business, you can claim a percentage of the total cost of the panel. So this means SARS can help you cut the huge costs of purchasing and installing solar power by offering to take back a certain percentage (based on government policies).
Understanding SARS Section 12B Income Tax Act Allowance
According to the amendment in the section 12B income tax act, all the renewal energy assets costs in the country will have a 25% additional rebate. Furthermore, this is a one-year allowance, and section 2B is amended specifically from 1 March 2023 to 28 February 2025. This expanded incentive will benefit not only individuals but business organizations as well.
Business Tax Incentives for Renewable Energy in South Africa
Under the section 12b allowance, there are no restrictions on the project size. So, no matter how big or expensive, it will still be eligible for this incentive. Moreover, from March 2023, SARS allows taxpayers to claim an astounding 125% deduction in the first year.
For example, if your business has invested R2 million in renewable energy or solar panels, in this case, it can deduct R2.5 million from its taxable income. Furthermore, this means the business will now be taxed on a lower income. Moreover, during the first years of investment, you can potentially pay R675,000 less in taxes to the government or SARS in this scenario.
Rooftop Solar Tax Incentives for Individuals
To reduce the dependency of homeowners on the national electricity grid, SARS has invited individual taxpayers to participate in this movement by installing solar panels in their homes. Moreover, this will help the government cope with the increasing demand for electricity as people become independent through rooftop solar tax incentives. Similarly, under this act, the individual taxpayer can claim a tax rebate of 25% of the total panel cost.
For instance, suppose you have purchased solar panels for R60,000; you can claim a tax rebate of R15,000 off of it. However, this only works if you have purchased new and unused panels; moreover, it does not include the cost of batteries and inverters. Furthermore, you must install it in a private residence and have the installation compliance certificate issued between 1 March 2023 to 29 February 2024.
Additionally, these incentives have resulted in making the solar power system more financially appealing to both business owners and homeowners. Therefore, South Africa has witnessed a huge interest in renewable energy sources because people can now contribute to a cleaner and greener environment and save money.
How Do I Claim My Solar Rebate in South Africa?
You can claim your solar rebate from SARS if you have the documents and evidence of your purchase of solar PV panels. Moreover, you can visit the SARS branch and present a VAT and a CoC. A VAT indicates the cost of solar PV panels separately from other items needed for solar power installation like batteries, inverters, etc.
Likewise, a CoC proves that your solar panels are brought into use for the first time between 1 March 2023 and 29 February 2024. Furthermore, the PAYE taxpayers can claim their rebate only after the assessment during the 2023 and 2024 filing seasons. Similarly, provisional taxpayers can claim it during provisional and final payments.
Requirements for SARS Solar Rebate
Some requirements must be met to be eligible for SARS solar rebate. Therefore, read the following points before purchasing solar PV panels.
- Solar panels must be new and unused. Otherwise, it will not be eligible for a rebate.
- The panels must have a minimum capacity of 275W per panel.
- It must be connected to the main distribution of the residence.
- You must have the certificate of compliance for installation with specific dates and its condition (new and unused).
What did the Treasury say about inverters and batteries exclusion from SARS solar rebate?
The Treasury said about the exclusion of batteries and inverters, “The focus on solar PV panels is to maximize the use of limited government funds to get as much additional generation capacity as possible- and recognizes that the government will have to focus on a partial rebate of the components that are most directly linked to generation. This is why installation costs are not included either”. So, according to the Treasury, batteries, and inverters can be operated without solar panels; however, the focus is on generating solar energy.
In short, SARS is on a mission to increase independent electricity generation through renewable energy sources. Moreover, this is a golden opportunity for both businesses and homeowners to embrace solar power and reduce economic costs.
Similarly, they can claim a SARS rebate of 25% on their solar panels’ total cost in private residences; however, business owners can claim an impressive 125% deduction in their first year.