Tax Incentive for rooftop solar panels

27 June 2023 220
In the 2023 national budget speech, Finance Minister Enoch Gondongwana unveiled a series of draft tax relief initiatives aimed at promoting renewable energy adoption among households and alleviating the burden on the struggling national power grid. These proposed tax relief incentives were published in the 2023 Draft Taxation Laws Amendment Bill (Draft Amendment Bill) which we briefly unpack herein.

The Draft Amendment Bill includes a tax rebate for individuals who invests in solar photovoltaic (PV) panels. There are, however, some important considerations and requirements that must be noted in order to ensure compliance with the applicable draft tax laws and for individuals to benefit from this particular tax incentive.

Limited to individuals and households
This particular rebate is only available for individuals who are liable to pay personal income tax and so be used to reduce their tax liability. This rebate is designed specifically for renewable energy investments made by households and is not applicable for solar installations at business locations.

Maximum limit of R15 000
Under the new tax relief measures, individuals will have the opportunity to claim a rebate equivalent to 25% of the expenses incurred for purchasing new and unused solar PV panels. However, there is a maximum limit of R15 000 per individual. To illustrate this, let's consider two scenarios: 

Scenario 1: A person purchases 4 solar PV panels at a cost of R5 000 per panel, resulting in a total cost of R20 000. In this case, they would be eligible to claim a tax rebate equal to 25% of the cost, which amounts to R5 000. 

Scenario 2: Another individual decides to purchase 25 solar PV panels at a cost of R5,000 per panel, resulting in a total cost of R125 000. The calculation for 25% of the cost adds up to R31 250. However, due to the maximum rebate limit of R15 000, this person would only be able to claim R15 000.

Practical and technical requirements 
To ensure that the additional capacity contributes to the existing energy infrastructure, only new and unused solar PV panels are eligible for the rebate. These panels can be installed as part of a new system or as an extension to an existing system.

To qualify for the rebate, the solar PV panels must have a minimum capacity of 275W per panel in terms of their design output. Other components such as batteries, inverters, fittings, or diesel generators, as well as installation costs, do not qualify for the rebate. Portable panels are also excluded from the eligibility criteria.

Furthermore, the solar PV panels must be installed at a residential property primarily used for domestic purposes. The installation needs to comply with the Electrical Installation Regulations of 2009 and must be supported by a certificate of compliance, ensuring the safety and adherence to electrical regulations.

The solar PV panels must be integrated into a system that is connected to the mains distribution of the private residence. The rebate applies specifically to qualifying solar PV panels that are put into use for the first time during the period from 1 March 2023 to 29 February 2024.

From a practical perspective, to claim the rebate, individuals must ensure the following:

1. They should possess a VAT invoice that clearly shows the cost of the solar PV panels as a separate item, along with evidence of payment.
2. They must provide a Certificate of Compliance as proof that the solar PV panels were put into use for the first time between 1 March 2023 and 29 February 2024.

For Pay-As-You-Earn taxpayers, the rebate can be claimed during the filing season of 2023/24 on assessment. For provisional taxpayers, the rebate can be claimed against both provisional tax payments and the final tax payment.

By meeting these criteria and providing the necessary documentation, individuals will be eligible to claim the rebate on their solar PV panels. If you are interested in making use of this concession, consult a renewable energy specialist to help you ensure that you are able to benefit from the available rebate once the Bill is signed into law. 

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s).