UNDERSTANDING THE SOLAR TAX INCENTIVES FOR IDIVIDUALS AND BUSINESSES

In his 2023 budget speech, South African Minister of Finance, Enoch Godongwana, emphasised the importance of transitioning to renewable energy sources (such as solar power) to mitigate climate change and alleviate the devastating effects of the energy crisis. As part of this commitment, Godongwana announced several tax measures and other incentives to encourage businesses and individuals to invest in solar energy. 

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Here’s what you need to know.

Solar tax benefits for individuals

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Individual taxpayers in South Africa who invest in rooftop solar energy can claim:

∙ A rebate of 25% on the cost of new or unused solar photovoltaic (PV) panels for the 2023/2024 tax year;

∙ A maximum tax benefit of R15 000 per individual.

To qualify, the solar panels need to be installed in a private home, and the installation must have a certificate of compliance dating between 1 March 2023 and 29 February 2024. Note that the tax incentive only applies to PV solar panels, not batteries or inverters.

Read more on the nitty gritty.

Renewable energy tax and loan benefits for businesses

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Businesses in South Africa that invest in renewable energy can receive the following tax benefits:

∙ Reduction of their taxable income by 125% of the cost of an investment in renewables (wind, concentrated solar, biomass and photovoltaic energy);

∙ No thresholds on the size of the projects that qualify for the tax incentive;

∙ Availability of the tax incentive for two years (for projects commencing between 1 March 2023 and 28 March 2025).

The minister also announced changes to the current Covid-19 Bounce Back Loan Scheme to help businesses invest in renewable energy. The Energy Bounce Back Scheme will be introduced in April 2023, guaranteeing solar-related loans for small and medium enterprises on a 20% first-loss basis. This means the government will absorb 20% of defaulted loans, incentivising commercial banks to issue more loans to businesses for renewable energy projects.

By incentivising the adoption of solar power and other clean energy sources, the government hopes to create a more environmentally friendly and economically prosperous future for South Africa. 

For more advice on utilising the expanded renewable energy tax benefits for your household or business, you are welcome to book a consultation with one of our tax experts at Huysamen Westraad, Inc.