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Tax breaks for Rooftop Solar for Businesses and Households

Tax breaks for Rooftop Solar for Businesses and Households

The government intends to promote renewable energy investment with R9 billion in tax relief

To alleviate the consequences of escalating blackouts, South Africa's 2023 Budget features R9-billion in tax breaks to incentivise investments in renewable energy, such as rooftop solar, for businesses and households.

The National Treasury declared that it would alter the bounce-back loan program, which was initially set up to aid the recuperation of firms from the Covid-19 emergency, to address energy-associated limitations.

Godongwana, South Africa's Finance Minister, stated that the choice to encourage investments in renewable energy sources was made to enable customers to reduce the strain on the grid, yet he also highlighted that this incentive was not unlimited.

The government declared that, for a limited time, the tax break accessible to companies supporting renewable energy would be extended beyond what it currently provides. This would enable businesses to deduct the expenses of qualifying investments over either a one- or three-year span, providing a cash flow advantage during the initial stages of the project.

A new incentive allows businesses to receive a 125% deduction in the first year for any renewable-energy projects regardless of the amount of energy generated.

For investments that are used for the first time between the period of March 1, 2023, to February 28, 2025, an adjusted incentive shall be provided.

The Budget Review highlights that businesses with taxable income will experience a reduction in their tax obligations when they take advantage of the deduction.

The National Treasury reveals that an investment of R1-million in renewables would be eligible for a deduction of R1.25-million. By taking advantage of the current corporate tax rate, the deduction could decrease a company's corporate income tax liability by R337 500 in the initial year of operation.

Households may be eligible for a tax rebate of 25% for purchasing new and unused solar PV panels, as part of a rooftop solar incentive.

The Budget Review has stated that to be eligible, solar panels must be purchased, installed at a private residence, and have a certificate of compliance issued between 1 March 2023 and 29 February 2024. Additionally, the rebate is available only for solar PV panels and not for inverters or batteries, the purpose is to encourage further generation.

The advantage of this system is that it can be utilized to reduce an individual's tax burden for the 2023/24 fiscal year to a maximum of R15 000. To illustrate, if an individual, purchases 10 solar panels, costing R40 000, they can decrease their personal income tax bill for the 2023/24 tax year by R10 000.

By May, the National Treasury intends to modify the bounce-back scheme to facilitate the assurance of solar-based loans for small and medium-sized businesses.

The new plan will enable banks to borrow directly from the scheme to finance the rental of solar energy equipment to small companies, as well as let small businesses that are installing solar energy systems to access loans for their working capital.

In April 2022, the government loan guarantee scheme was cut down to R20-billion by Godongwana due to a lower uptake than anticipated. Of that sum, R8-billion will be allocated to the newly-established bounce-back program.

With our loadshedding troubles, we need to urgently adopt alternative water and energy sources to save our economy. Since it requires power to produce quality water and generating power with the traditional coal power stations uses enormous amounts of water, we are on the brink of disaster, both economically and environmentally.


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