There are only 10 days left to build your solar installation to qualify for the Personal Solar Power Tax Incentive.
- The solar power tax incentives for individuals will only be in place for 10 more days.
- Eligible individuals will be able to claim tax credits from SARS when their annual tax is calculated later this year.
- SARS has published a guidance note on incentives setting out who is eligible and how to claim.
- For more financial news, visit: News24 Business top page.
As the Personal Solar Power Tax Incentive is expiring, the South African Revenue Service (SARS) has issued a guidance note explaining who is eligible for this credit and how to redeem it.
The personal solar power tax incentives were first announced by Finance Minister Enoch Godongwana during the 2023 National Budget.
Under this incentive, eligible individuals can reduce their tax liability by 25% of the amount spent on the panel up to a maximum of R15,000.
The deadline to purchase, install, and use new and unused solar panels to qualify for solar tax benefits is February 29th. Panels used after March will not be eligible for the tax credit.
Eligible individuals will be able to claim tax credits from SARS when their annual tax is calculated later this year.
Read more | Everything you need to know about solar power tax benefits
Strong incentives were also introduced for businesses, offering them a 125% tax credit. This incentive will run for two years and expire at the end of February 2025.
It remains to be seen whether Mr Godongwana will announce an extension to the personal solar power tax break in his 2024 budget speech on Wednesday.
solar boom
The introduction of this incentive coincided with a significant increase in non-Eskom solar installed capacity in South Africa.
Based on Eskom data, between March 2023, when the incentive was introduced, and January 2024, the installed capacity of so-called “rooftop” solar PV in South Africa increased by 66%.
Although coal and solar power are inherently very different, technically the installed capacity of solar power that is not contracted to Eskom exceeds that of the country's largest coal power station.
Read more | Amazing boom in rooftop solar – now outpacing SA's largest power plants
Although the rapid increase in installed solar capacity occurred while solar incentives were in place, incentives were not the main driver of solar PV adoption.
Chris Yelland, managing director of EE Business Intelligence, previously told News24 that preserving power during load shedding and saving money on electricity bills could be a stronger driver for solar installation than incentives. He said it was expensive.
In either case, eligible individuals can claim the credit when filing their tax return.
Here is a breakdown of the eligibility criteria for individual incentives and the information you need to submit on your tax return.
The information below is based on the SARS Guidance Note and a more detailed breakdown can be accessed here.
qualification
The guidance note sets out requirements to ensure that only panels that provide new energy to the grid are eligible as part of the incentive.
This is one reason why you only spend on solar panels and other parts of your equipment, such as inverters and batteries, are not eligible for incentives.
“The rationale for allowing the cost deduction of solar panels alone is due to the fact that it is the solar panels that facilitate or expand domestic electricity generation capacity,” the SARS guidance note said.
Eligibility requirements are as follows:
- Only panels with a generating capacity greater than 275 watts (W) are eligible for the incentive. According to Energy Sage, most home solar panels have a power rating of 350W to 450W.
- Panels must be used for the first time between March 1, 2023 and March 1, 2024.
- The panels installed must be new. New in this context means the panel was “recently acquired” and installed. SARS did not say exactly what “recently acquired” meant, but said that if the panels were acquired “many years ago” and installed during the incentive period, they are not new. suggested.
- Panel must be unused. This means that the panel will only be certified if it has not been previously used in another installation.
- The panels must be installed or fixed in a house that is primarily used for domestic purposes.
- Installation must be connected to the residential power distribution board.
- An electrical compliance certificate must be issued for the installation.
Tax credits can only be claimed by the individual who paid for the solar panels. This creates some potentially interesting scenarios.
For example, if a tenant of a leased property pays for solar panels, the tenant can claim the solar tax credit, not the property owner. In this case, the person who purchased the equipment must submit, in addition to other required documents, a rental agreement stating the names of the parties to the lease agreement.
In addition to this, if the cost of the panel is split between multiple people, for example co-owners of a property, each individual can claim 25% of the amount he or she paid for the panel. The maximum value he receives is R15,000.
Necessary information
Tax credits are claimed at tax time when an individual's regular tax liability is determined. This means applicants must wait until tax season begins before they can claim the credit.
According to the guidance note, the information that individuals must submit on their tax return is:
What information will you need?
- Number of new and unused solar panels installed.
- Make sure the panel is connected to your home's electrical panel board.
- Confirmed that the minimum power generation capacity per solar panel is 275W.
- Confirmation that a genuine electronic certificate of conformity has been issued.
The guidance notes do not exclude the possibility that more information may be required in the application.
The guidance note also states that individuals should retain copies of documents such as the electrical compliance certificate issued for the installation, the invoice for the panels purchased, and proof of the date of installation and when the panels were used. It is listed. Proof that the panels are installed in the house used by the person who purchased the panels.