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Budget Speech
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During this year’s budget speech the SA Finance Minister, Enoch Godongwana, announced that National Treasury would provide tax incentives to households and businesses in order to encourage transition to renewable energy.
The measures include a significant rebate for businesses launching renewable energy projects and incentives for private homes too.
But what exactly is involved?
Private Homes
To encourage the uptake of solar panels among the general public so as to reduce the load on the grid, private households will be able to claim a rebate of 25% of the panel costs, up to R15,000, and reduce their tax liability for 2023/24.
Treasury gave these examples to explain how the max rebate works: ‘an individual who purchases 10 solar panels at a cost of R40,000 could reduce their personal income tax liability for the 2023/24 tax year by R10,000.
A different person is able to buy 20 panels at a cost of R4,000 per panel (total cost of R80 000). The calculation of 25% adds up to R20,000, but they can only claim R15 ,000.’
The panels have to be new and have a minimum capacity of 275W per panel.
It is important to note that other components (like batteries or inverters) and installation costs, portable panels, and projects with a generation capacity below 1 MW will not qualify.
Businesses
Businesses can reduce their taxable income by 125% of the cost of investing in renewables (from 1 March 2023).
The incentive will be available for two years to stimulate investment as soon as possible. The adjusted incentive will be available for new investments (not existing ones) brought into use between 1 March 2023 and 28 February 2025.
Investors in PV projects below 1 MW can deduct 100% of the cost in the first year. Bigger projects can claim a 125% deduction in the first year for all renewable energy projects under the adjusted incentive.
Treasury gave this example of a business with profitable taxable income:“ 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,”
Lastly, government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis and launch the Energy Bounce Back Scheme in April 2023.
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