The President of South Africa has promulgated the Taxation Laws Amendment Act 42 of 2024 which includes changes to environmental tax provisions. The law was published in the Official Gazette on 24 December 2024.

The various amendments include:

New definitions for battery electric and hydrogen vehicles in tax Act: 

  • Section 1(1) of the Income Tax Act 58 of 1962 now includes new definitions: (i) “battery electric vehicle,” referring to any fully electric vehicle powered by rechargeable batteries; and (ii) “hydrogen-powered vehicle,” referring to any vehicle powered by hydrogen fuel cells. These changes will take effect on 1 March 2026, applying to assets acquired from that date onward.

Section 12C: 

  • Paragraph (f) has been added to section 12C of the Income Tax Act 58 of 1962, disallowing a deduction under this section for assets already granted a deduction under section 12V. This amendment will come into effect on 1 March 2026, applying to assets acquired on or after that date.

Section 8(4):

  • A new paragraph (nB) has been introduced in section 8(4) of the Income Tax Act 58 of 1962, stating that if a taxable person disposes of an asset under section 12V within five years of its service date, 50% of the asset’s cost must be included in the taxable person’s gross income for the year of disposal. This change will be effective from 1 March 2026 for assets acquired on or after that date.
  • Paragraph (nC) in section 8(4) of the Income Tax Act 58 of 1962 stipulates that if an asset under section 12V is disused within five years of its service date, 50% of its cost must be included in the taxable person’s gross income for the year of disposal. This amendment will come into effect on 1 March 2026 for assets acquired on or after that date.

Income Tax Act 58 of 1962

  • A new section (12V) has been added to the Income Tax Act 58 of 1962, providing an advanced capital allowance of 150% of the capital cost of buildings, new machinery, equipment, plant, or articles, or improvements to machinery, plant, or utensils used in the production of battery electric or hydrogen-powered vehicles in South Africa. This allowance will apply to assets placed in service between 1 March 2026 and 1 March 2036. The amendment will take effect on 1 March 2026 for assets acquired from that date.
  • Section 13 of the Income Tax Act 58 of 1962 has been amended with the addition of subsection (2A), disallowing a deduction under this section for assets already granted a deduction under section 12V. This change will come into effect on 1 March 2026 for assets acquired on or after that date.
  • Paragraph (d) has been added to section 13 quat of the Income Tax Act 58 of 1962, disallowing a deduction under this section for assets already granted a deduction under section 12V. This amendment will be effective from 1 March 2026 for assets acquired on or after that date.

Carbon Tax Act:

  • Section 6 of the Carbon Tax Act 15 of 2019 has been amended by adding subsection (4), which defines “renewable electricity purchased under a power purchase agreement” to include renewable electricity purchased under an agreement ceded to the National Transmission Company of South Africa. This change came into effect on 1 January 2024.
  • The fugitive emission factors in Table 1 and Table 2 of Schedule 1 of the Carbon Tax Act 15 of 2019 have been updated. This amendment took effect on 1 January 2024.
  • Schedule 2 of the Carbon Tax Act 18 of 2019 has been updated with the addition of the Coal to Liquids table. This amendment also came into effect on 1 January 2024.

Earlier, the South African National Treasury released the draft Taxation Laws Amendment Bill (B16-2024)  on 30 October 2024, which includes proposed changes to environmental taxes, among other provisions.