The South African Revenue Service (SARS) has published a draft guide concerning allowances and deductions for assets used in generating electricity from specified renewable energy sources.
This guide outlines several tax incentives aimed at promoting investment in renewable energy projects, which are crucial for reducing reliance on fossil fuels and supporting sustainable economic growth.
Stakeholders and the public are invited to provide feedback on the draft by 30 August 2024.
Tax incentives overview
- Section 12B: Allows businesses to accelerate the depreciation of renewable energy assets. Typically, businesses can deduct 50% of the cost in the first year, 30% in the second year, and 20% in the third year. For small solar energy systems (up to 1MW), the entire cost can be deducted in the first year.
- Section 12BA: Introduces an enhanced deduction of 125% for new and unused assets acquired between 1 March 2023 and 1 March 2025, incentivising new investments in renewable energy.
- Section 12U: Provides deductions for infrastructure costs associated with large renewable energy projects (over 5MW), facilitating essential development for these initiatives.
Scope of application
The tax incentives apply to various forms of renewable energy generation, including wind, solar, hydropower (up to 30MW), and biomass, reflecting a comprehensive approach to fostering the renewable energy sector in South Africa.
This draft guide is part of a broader strategy by the South African government to encourage investment in renewable energy, create jobs, and promote environmental sustainability.
