The Section 12B Tax Incentive in South Africa offers significant benefits for businesses and individuals investing in renewable energy, particularly solar power. Here are some of the key advantages:
Accelerated Depreciation:
• Businesses can claim an accelerated depreciation of 100% of the cost of new or unused solar PV systems in the first year of use. This has been increased to 125% for assets brought into use on or after March 1, 202312.
Tax Deduction:
• The full cost of the solar power system can be deducted as a depreciation expense from a company’s profits, effectively reducing the company’s income tax liability by the same value as the installed solar system3.
Eligibility for Various Assets:
• The incentive covers assets used to generate electricity from renewable sources, including photovoltaic solar energy, concentrated solar energy, wind power, hydropower, and biomass. This includes the supporting structures and certain components like batteries and inverters, provided they are part of the solar power generation system1.
Encouraging Investment:
• The incentive is designed to encourage investment in renewable energy by providing immediate tax relief, which can improve cash flow and make solar projects more financially viable4.
Environmental Impact:
• By incentivizing the adoption of solar power, the incentive supports the shift towards a greener economy and helps alleviate the current energy crisis in South Africa.
The incentive promotes the use of solar power to address the energy crisis in South Africa and drive the transition towards a more environmentally friendly economy.
No Security Required for Funding:
• Accessing Section 12B funding does not require security, which can be beneficial for property or business owners. It allows for minimal upfront costs and stable, predictable costs over the funding term5.
It’s important to note that to qualify for these benefits, the solar power system must be new and unused, and it must be brought into use for the first time between March 1, 2023, and March 1, 20251. For more detailed information or to see how these benefits can apply to your specific situation, it would be best to consult with a tax professional or financial advisor.