Tax relief announced for homeowners going solar – all the details

Finance minister Enoch Godongwana on Wednesday took the wraps off a tax incentive scheme aimed at encouraging South African homeowners to deploy solar panels to reduce the pressure on Eskom.

Individuals will be able to claim a rebate to the value of 25% of the cost of new and unused solar photovoltaic (PV) panels, up to a maximum of R15 000 per individual, the national treasury explained in an FAQ document published on its website.

It explained that the incentive is designed to encourage households to deploy clean energy generation, which can also supplement electricity supply.

Read: More tax relief for businesses to build their own power plants

The incentive will only be available for 12 months “to encourage investment as soon as possible”, national treasury said.

The following are key questions and answers about the incentive from national treasury’s FAQ.

Who can claim the incentive?

Individuals who pay personal income tax can claim the rebate against their tax liability. This rebate is not intended for solar installations at business premises.

What can be claimed?

Individuals will be able to claim a rebate to the value of 25% of the cost of new and unused solar photovoltaic (PV) panels, up to a maximum of R15 000 per individual. For example, a person buys 10 solar PV panels, at a cost of R4 000/panel (total cost of R40 000). That person would be able to claim 25% of the cost up to R15 000, so R10 000.

A different person can buy 20 panels at a cost of R4 000/panel (so total cost of R80 000). The calculation of 25% adds up to R20 000, but they can only claim R15 000.

What are the requirements?

Only new and unused solar PV panels qualify, to ensure that the capacity is in addition to what the country already has in place. The panels can be installed as part of a new system, or as an extension of an existing system. Only solar PV panels with a minimum capacity of 275W per panel (design output) qualify for the rebate.

Other components of a system – batteries, inverters, fittings or diesel generators – and installation costs do not qualify. Portable panels will also not qualify. 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 proved with a certificate of compliance in terms of the electrical installation regulations to ensure safety of the installation and compliance to electric regulations.

The solar PV panels must form part of a system that is connected to the mains distribution of the private residence.

The rebate applies to qualifying solar PV panels that are brought into use for the first time in the period from 1 March 2023 to 29 February 2024.

How do you claim the incentive?

Individuals will be able to claim the rebate if they have: a VAT invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment; certificate of compliance evidencing that the solar PV panels were brought into use for the first time in the period from 1 March 2023 to 29 February 2024.

PAYE taxpayers will be able to claim the rebate on assessment during 2023/2024 filing season. Provisional taxpayers will be able to claim the rebate against provisional and final payments.

Why only solar panels and not inverters, batteries and diesel generators?

Diesel generators are often used as emergency backup, but are not a sustainable solution to generate additional power. They increase demand for fuel and have negative environmental impacts. Including generators would detract from the climate objectives government is committed to, where fiscal instruments like the carbon tax play an important role.

While an inverter and batteries are required to use solar panels, inverters and batteries can be operated without solar panels – in which case they offer no additional capacity to the system. The focus on solar PV panels is to maximise the use of limited government funds to get as much additional generation capacity as possible – and recognises that 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.

What about people who rent their homes?

There is no ownership limitation for the incentive, so installations by landlords or renters would be eligible, but only the party that pays for the solar panels can claim the rebate.

What about sectional title schemes and bodies corporate?

If occupants are enabled to install their own panels, then the tax incentive applies as for all other individuals. A body corporate will not be able to claim this incentive. It is not clear whether many bodies corporate will be purchasing solar installations instead of using leasing or other options to avoid upfront costs for members.

Government will be consulting on this aspect. If there is widespread interest in bodies corporate purchasing and installing solar panels, then payment (for example, special levies) for solar installations levied from the occupants would have to indicate the cost of the solar panels separately – as would be the case for any other claimant. The applicable certificate of compliance data would also have to be shared with the South African Revenue Service (Sars). Because there would be some adjustments to ensure that the right people could claim the right amounts, there will be consultation to determine the required approach and documentation.

Will I need to pay Sars if I sell my home after installing solar PV?

No, there will be no recoupment if you sell your house after having benefitted from this incentive as the solar panels will likely remain fixed to the house and used by the following owner – still enabling an expansion in generation. There will, however, be a clawback of the rebate if you sell the panels themselves within one year after they were first brought into use to counter potential abuse.

When will this become part of tax legislation?

This incentive will be included in the annual tax amendments. A draft version of the legislation will be published for public comment no later than the publication date of the 2023 Draft Taxation Laws Amendment Bill.  – © 2023 NewsCentral Media

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