By Cara Van Deventer
The intermittent access to electricity has made government dangle the carrot for both homeowners and lessees to reduce their reliance on the country's overburdened power grid. The incentive - a 25% credit on the cost of the panels, to the limit of R15 000 per installation.
The solar tax incentive, like the medical credit system, is currently limited to the tax period of 1 March - 29 February 2024 (Leap year). The tax benefits can only be claimed at the end of the tax year. To qualify, the solar panels must be purchased and installed at a private residence, and a certificate of compliance for the installation must be issued from 1 March 2023 to 29 February 2024. "This can be used to reduce their tax liability in the 2023/24 tax year. This incentive will be available for one year," said Minister of Finance Enoch Godongwana.
The regulations have been created to add capacity, which restricts installations to only new or previously unused panels. Only solar PV panels with a minimum capacity of 275W per panel (design output) qualify for the rebate. But while new installations are automatically considered, additions to current systems will also be considered.
It is important to note that the rebate is only available for solar PV panels, and not inverters or batteries, to focus on the promotion of additional generation.
Solar PV panels must be installed at a residence that is mainly used by an individual for domestic purposes. The installation will have to be approved with a certificate of compliance in terms of the Electrical Installation Regulations, 2009, to ensure safety of the installation and compliance to electric regulations.
The offer extends beyond homeowners, as lessees are also eligible. Currently, only individuals can benefit from this scheme, as body corporates are excluded from using this tax benefit. Treasury did say in its note that it is not clear whether many body corporates will be purchasing solar installations instead of using leasing or other options to avoid up-front costs for their members. But the door on this option is not closed as government is investigating the possibility of creating opportunities for residents in complexes to benefit from a potential initial cash outlay by body corporates.
Keeping It In The Family
Similarly, if someone pays for the solar panels at their parents' or children's home, the purchaser should be able to qualify for the incentive, provided there is a tax invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment.
Businesses Can Also Benefit
From 1 March 2023, businesses with a positive taxable income can benefit from a 125% reduction in taxable income by investing in renewable energy.
"There will be no thresholds on the size of the projects that qualify, and the incentive will be available for two years to stimulate investment in the short term." Godongwana said.
Prior to the budget speech, SARS was already preparing to create a cashflow benefit by deducting 50% of the solar installation costs in the first year, 30% in the second and 25% in the third year. Investments in wind, concentrated solar, hydropower below 30 megawatts (MW), biomass and photovoltaic (PV) projects above 1 MW would qualify for this. Investors in PV projects below 1 MW are able to deduct 100% of the cost in the first year.
Trustees can seek advice on how to benefit from the intricacies of the new regulations by consulting their Destinata Accountant.
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