With load shedding still firmly on the horizon, it was welcomed news in the recent Medium-Term Budget Policy Statement, that the government is advocating for the solar panel tax incentive to be extended to batteries and inverters. Electricity Minister, Kgosientsho Ramokgopa, wants more businesses and households to opt for rooftop solar panels, but feels that the incentive needs to be extended to components that carry the heaviest capital cost and shouldn’t just be restricted to solar PV systems.
To know how this tax incentive will work in your 2024 income tax return, is to understand that it is actually a credit or rebate, that will be a deduction against your calculated tax liability. The required elements of this is as follows:
- It is available in respect of a cost incurred only by a natural person (if the home is owned by a trust or company and the owner incurs the expenditure, the rebate is not available, but it will be available if the occupier incurs the cost).
- The cost must be incurred on the acquisition of new and unused solar photovoltaic panels that have a generation capacity of at least 275W each.
- The panels must be brought into use for the first time on or after 1 March 2023 and before 1 March 2024.
- The rebate is an amount equal to 25% of the cost of the panels, with a maximum rebate of R15 000.
- The panels must be installed and mounted on or affixed to a residence mainly used for domestic purposes by the individual incurring the cost.
- The installation must be connected to the distribution board of the residence and be issued with an electrical certificate of compliance.
What is needed to ensure your solar panel rebate is approved by SARS?
- A VAT invoice reflecting the cost of the solar panels, separately from other items
- The proof of payment of the above invoice
- A Certificate of Compliance showing that the panels were brought into use for the first time during the period of 1 March 2023 to 29 February 2024
What happens if I sell my home?
You will not need to pay back the incentive. As the rebate only applies to fixed solar panels, the next person who moves into or uses the property will be able to produce their own power.
How do I claim if I live in a sectional title property?
Residents who live in sectional title properties and are allowed to install their own panels can claim in the same way as other homeowners. However, there are currently no provisions for reclaiming levies that are attributed to the cost of solar panels.
Can I claim the incentive if I rent my solar panels?
There is currently no provision for individuals who rent or lease solar panels to claim back any monies spent on covering this cost.
Solar Panel Incentives for Businesses
The initial Section 12B capital allowance provides for accelerated depreciation of 100% of the initial costs in the year the business started using the solar system.
From 1 March 2023, this incentive will increase to an accelerated depreciation allowance of 125%.
Therefore, a company that invests R150,000 in a solar system can deduct the following:
- VAT of 15% is reclaimable on the total installation charge (subject to a valid VAT invoice being issued by the supplier).
- Income tax saving of 27% for companies.
- If the R150,000 is VAT exclusive, the income tax savings will be R40,500.
If the claiming of this tax incentive seems confusing, why not let the experts at Dirmeik Consulting handle the intricacies to ensure that your claim is approved to the maximum benefit. Contact us today for a consultation to see how we can best meet your tax and accounting needs.
