Clean Energy Tax Incentive Businesses

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Clean Energy Tax Incentive Individuals

2023-2025 SARS SOLAR Amendment

This note sets out the basic characteristics and requirements for the solar panel incentive announced by the Minister of Finance on 22 February 2023. This is meant to help individuals in their immediate decision-making, rather than postponing any solar installation until the legislative process can be finalised.

What is the objective of the incentive?

Expansion of the renewable energy tax incentive

The tax incentive is available for businesses to promote renewable energy will be temporarily expanded to encourage rapid private investment to alleviate the energy crisis.

The current incentive allows businesses to deduct the costs of qualifying investments over a one- or three-year period, which creates a cash flow benefit in the early years of a project. Businesses are able to deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar, hydropower below 30 megawatts (MW), biomass and photovoltaic (P) projects above 1 MW. Investors in PV projects below 1 MW are able to deduct 100% of the cost in the first year.

Under the expanded incentive, businesses can claim a 125% deduction in the first year for all renewable energy projects with no thresholds on generation capacity. The adjusted incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025. For a business with positive taxable income, the deduction will reduce its tax liability. For example, a renewable energy investment of R1 million would qualify for a deduction of R1.25 million. Using the current corporate tax rate, this deduction could reduce the corporate income tax liability of a company by R337 500 in the first year of operation.

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