In terms of section 12B(h) of the Income Tax Act, No. 58 of 1962, as amended, taxpayers may deduct costs related to their solar installation from their taxable income.

Of course, not everything counts as a deductible expense. The costs that may be deducted are as follows:

  • installation planning costs;
  • panel delivery costs;
  • installation costs; and
  • installation safety office costs.

 

SARS allows 100% of the costs of solar installations (specified above) as a tax deduction incurred in the production of taxable income, provided the photovoltaic solar energy system used produces less than one megawatt of power. If the photovoltaic solar energy system used produces more than one megawatt of power, the deduction may be claimed as follows:

  • 50% in the year of assessment during which the asset was brought into use;
  • 30% in the second year;
  • 20% in the third year;

 
Furthermore, for taxpayers to qualify for this incentive, they must meet the following three requirements:

  1. The plant, machinery, implement, utensil, or article is owned by the relevant taxpayer claiming the deduction (or purchased by it under an installment credit agreement)
  2. Such plant and machinery are brought into use for the first time by that taxpayer
  3. Such plant and machinery are utilised by the taxpayer in the course of its trade in the generation of electricity from specific renewable energy resources.

 
Therefore, only businesses generating taxable income can deduct the cost of the solar installations against this income. A business that is VAT-registered may also claim back the input VAT.

Residential homeowners, unfortunately, cannot take advantage of these benefits, unless running a business from home.

With this in mind, going solar has never made more sense.

Please note that these articles are to be considered general information sheets only and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information therein. Always contact one of your Finleys advisors for specific and detailed advice. Errors and omissions excepted (E&OE).