What are the solar tax incentives for businesses in South Africa?

South Africa is currently in the midst of an electricity crisis, and Enoch Godongwana, Minister of Mineral Resources and Energy, sought to address this matter during the budget speech. In 2021 we saw only 75 days of loadshedding while in 2022 we had to endure 207 days - a significant jump. So what exactly is the solution to this ongoing problem and how can small business owners get a step ahead in this current economic climate?

Well, guess what, if there is one thing South African business owners know how to do it’s thrive against all odds. If you are wanting to take your business off the grid, we know it can be a difficult decision, one where you need to weigh up the effectiveness, the costs and the whereabouts. So we thought we’d make your life a little bit easier with a couple of tips on getting started with a solar energy solution for your business.

Why should I use a solar energy solution for my business?

This may seem like a no-brainer, especially given the current energy crisis in South Africa, but there are numerous benefits to switching your Eskom reliance over to solar energy. Here are just a few we’ve rounded up:

Cost savings: South Africa has abundant sunlight, making solar energy a viable and cost-effective alternative to traditional grid electricity. By investing in solar energy, businesses can save money on their electricity bills and reduce their dependence on expensive and unreliable grid power.

Environmental benefits: Solar energy is a clean and renewable source of energy, which means it does not produce harmful emissions or contribute to climate change. By using solar energy, businesses can reduce their carbon footprint and contribute to a more sustainable future.

Increased energy independence: South Africa's electricity grid is often unstable, with frequent power outages and loadshedding. By investing in a solar energy solution, businesses can reduce their reliance on the grid and ensure that they have a reliable source of electricity.

Government incentives: The South African government offers several incentives to businesses that invest in renewable energy, including tax credits, accelerated depreciation, and funding programs like the GreenFund. These incentives can help offset the cost of installing a solar energy system.

Positive public perception: Consumers are becoming increasingly aware of environmental issues and are more likely to support businesses that prioritise sustainability. By investing in solar energy, businesses can improve their public image and attract environmentally-conscious customers.

What are the most efficient solar solutions for businesses?

South Africa has abundant sunshine throughout the year, making it an ideal location for solar power generation. Here are some of the most efficient solar solutions for businesses in South Africa:

Rooftop Solar PV Systems: Rooftop solar PV systems are the most common solar solution for businesses in South Africa.These systems generate electricity by converting sunlight into electricity using photovoltaic cells. They can be installed on the rooftops of commercial buildings and can provide a significant portion of a business's electricity needs.

Solar Water Heating Systems: Solar water heating systems are an efficient way for businesses to reduce their energy costs. These systems use the sun's energy to heat water, which can be used for a range of applications, including space heating and industrial processes.

Solar Carports: Solar carports are another popular solar solution for businesses in South Africa. These structures provide shade for parked vehicles while also generating electricity from the sun. Solar carports can be a great way for businesses to reduce their energy costs and carbon footprint.

Solar Batteries: Solar batteries are becoming increasingly popular in South Africa as businesses seek to increase their energy independence. These batteries store energy generated by solar systems during the day, which can then be used at night or during times of high demand.

Solar Micro grids: Solar micro grids are a more advanced solar solution for businesses in South Africa. These systems combine solar PV, energy storage, and smart grid technologies to provide businesses with a reliable and sustainable source of electricity.

Businesses should consider their energy needs, budget, and available space when selecting the best solar solution for their needs.

What is the solar tax rebate in South Africa for businesses? 

The National Treasury proposed a solar tax incentive for both businesses and individuals who are producing renewable energy. The purpose here is that there will be less pressure on the national grid, where Eskom will be able to achieve energy security in the long term.  

Additionally, as part of the bounce-bank covid scheme, SMEs will hopefully receive government grants if they invest in any solar-related projects (TBC).

Starting from March 1st, 2023, businesses will have a 2-year opportunity to receive a 125% tax deduction on qualifying investment costs, without any limit on the investment cost. This will enable businesses to receive a cost plus 25% allowance for renewable projects in the year of investment. The Treasury has also announced that businesses investing in wind, concentrated solar, hydropower below 30 MW, biomass, and photovoltaic (PV) projects above 1 MW, will be able to deduct 50% of the costs in the first year, 30% in the second year, and 20% in the third year, as qualifying investments.

Furthermore, The Treasury stated that if a business has a positive taxable income, the deduction will help to decrease its tax liability. For instance, if a business invests R1 million in renewable energy, it would be eligible for a deduction ofR1.25 million. Based on the current corporate tax rate, this deduction could potentially lower a company's corporate income tax liability by R337,500 in the initial year of operation.

How do I claim my solar rebate in South Africa as a business owner?

Although this is the proposed plan for the solar tax incentive for businesses, we will only see it take effect between 1 March 2023 and 28 February 2025. This adjusted incentive will only be available for investments brought into use for the first time during this period.

Businesses  will be able to claim the rebate if they have:

·     A VAT invoice that indicates how much the solar PV panels cost along with proof of payment.

·     A Certificate of Conformity (CoC) proving that the PV panels were brought into use for the first time between 1 March 2023 and28 February 2025.

Corporate taxpayers will be able to claim the rebate on assessment during the 2023/24 filing season. For the full rundown on paying tax as a small business owner, read the guide on SARS.

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If you are unsure where to even start with financing your solar solutions from the get-go, apply for business finance and we'll help you compare offers from trusted lenders.