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How you can avoid load-shedding while reducing your tax bill

In his Budget Speech on 22 February 2023, Minister of Finance Enoch Godongwana announced the introduction of tax incentives intended to encourage the rapid uptake of renewable energy.

Government has developed the scheme in a bid to encourage households to invest in clean electricity generation capacity. The programme is intended to minimise demand on the national grid by reducing the number of households that are entirely reliant on Eskom for their power.

The incentives will result in about R4 billion in tax relief for individuals who install solar photovoltaic (PV) cells to power their homes.

Taxpayers who install rooftop solar panels in their home for private use from 1 March 2023, will be able to claim a rebate of 25% of the cost of the solar panels, up to a maximum of R15,000, provided certain qualifying criteria are met.

How does the solar panel tax incentive for individuals work?

Who can claim?

Private individuals who pay personal income tax may claim the rebate against their annual income tax liability. In other words, this tax rebate allows you to subtract up to R15,000 from the final amount on your tax return. Unlike a tax deduction, which only decreases your taxable income, a rebate is a rand-for-rand reduction in the amount of tax you owe SARS.

This means that both homeowners and those who rent their properties are entitled to install solar panels and take advantage of this incentive. For those who do rent, it’s always a good idea to consult your landlord before making improvements such as installing a solar power system.

That said, there are a few requirements that you’ll need to fulfil to ensure that your PV cells are eligible for the rebate. To qualify, your solar panels must:

  • Be new and unused and brought into use for the first time during the period from 1 March 2023 to 29 February 2024
  • Form part of a system that is connected to the mains distribution of a private residence used mainly by an individual for domestic purposes
  • Have a minimum capacity of 275W per panel
  • An electrical certificate of compliance must be issued to the individual in terms of Electrical Installation Regulations, 2009.

Although the legislation requires that solar panels must be new and unused to ensure that the grid gains additional capacity (i.e. that more individuals become less reliant on Eskom-supplied power), these panels can be used to extend an existing system.

It’s good to note that the installation will have to be proved using a certificate of compliance. This will not only help to verify that the panels were fitted during the incentive period, but also to ensure the safety of the installation and compliance with electricity regulations.

What can I claim?

This tax incentive allows you to claim a rebate of up to 25% of the cost of new, unused solar PV panels to a maximum value of R15,000 per individual.

Keep in mind that installation and other solar power system component costs cannot be claimed under this incentive programme. In other words, you will not receive a rebate for any monies spent on batteries, inverters or other fittings that are necessary for the operation of the system.

Let’s consider a practical example. You decide that you want to install solar panels on the roof of your home. You find a supplier that sells these cells for R4,000 each. Both you and your neighbour decide to install solar panels.

You already have a bank of 10 panels and decide to buy 10 new panels for R40,000, plus R10,000 installation. In this case, you would be able to claim R10,000 (25% of R40,000) back for that purchase when you submit your next tax return.

Your neighbour doesn’t have any existing solar infrastructure. They decide to install 20 panels for a total of R120,000 including labour, battery and other setup costs. In this case, your neighbour would be able to claim only R15,000 under the incentive scheme. This is because they can only claim up to the rebate ceiling and only for PV panels.

Why are batteries and inverters excluded?

The decision to exclude inverters and batteries was taken because these items can be operated without solar panels.

Many South African households are using these devices to draw electricity from the grid, store it and access it during periods of load-shedding. In this instance, batteries and inverters offer no additional capacity to the system.

Government is focusing on PV cells to maximise the potential generation capacity while limiting the financial investment necessary for this outcome. As solar panels are most directly linked to generation, they have been identified as the priority component while batteries and inverters have been excluded from the scheme.

How do I claim a rebate for my solar panels?

The solar panel incentive can be claimed in much the same way as any other tax credit: the amount you paid for this equipment must be included in your tax return.

If you are a PAYE taxpayer, you will be able to submit the claim to the South African Revenue Service (SARS) during the 2023/24 filing season. Provisional taxpayers can claim the rebate against either the provisional or final tax payments.

There are three crucial documents you will need to have on hand to ensure that your rebate is approved:

  • VAT invoice indicating the cost of the solar panels separately from other items
  • Proof of payment of the above invoice
  • 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

Frequently asked questions about the solar panel tax incentive

Can I sell electricity back to the grid?

At present, the tax incentive is intended only to reduce reliance on Eskom-generated power by expanding generation capacity in individual households. There are currently no provisions for electricity buy-backs from private individuals.

Can SARS claw back the incentive?

Yes. If SARS finds that you have sold your solar panels within one year after they were bought, they will reclaim the amount you received as a rebate.

Will I need to pay back the incentive if I sell my home?

No. As the rebate only applies to fixed solar panels, the next person who moves uses the property you have fitted with solar panels will be able to produce their own power. The initial installation will have expanded generation capacity and there will be no need to pay back the incentive.

Why are diesel generators not eligible for a tax rebate?

Although diesel generators are often used for emergency power production, they aren’t a sustainable solution for generating additional power for the grid. Not only do they increase demand for fuel, but they also have negative environmental impacts and detract from the climate objectives the government has committed to.

How do I claim if I live in a sectional title property?

Occupants who live in sectional title properties and are allowed to install their panels are able to claim in the same way as all other individuals. However, there are currently no provisions for reclaiming levies that are attributed to the cost of solar panels. The government is willing to explore this option, but extensive consultation will be required to determine the correct approach and documentation.

Can I claim the incentive if I lease my solar panels?

There is currently no provision for individuals who rent solar panels to claim back any monies spent on covering this cost.

How long is the tax incentive in place for?

It is valid for tax year 2024 only: 1 March 2023 to 29 February 2024.



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