The tax break for the installation of solar panels at places of residence, announced by President Cyril Ramaphosa during the State of the Nation Address, may be much less than what many taxpayers anticipated would be unveiled in the Budget.
National Treasury provided basic details of the incentive scheme when it released the Budget documents on Wednesday. The information was provided in the form of a guidance note – it is not part of final or even draft legislation. Therefore, the final form of the incentive may change.
It said the fiscus will forfeit tax revenue of R4 billion because of the incentive.
The tax break for individuals who instal solar photovoltaic (PV) panels will be available for only one year, from 1 March 2023 to 29 February 2024. Another limitation is that the incentive does not make specific provision for sectional title schemes.
Individuals will be able to claim a rebate to the value of 25% of the cost of new and unused solar PV panels, capped at R15 000 per individual. This means that a person who buys 10 solar PV panels at a cost of R4 000 per panel (total cost of R40 000) will be able to claim R10 000 (25% of R40 000).
A person who buys 20 panels at a cost of R4 000 per panel (total cost of R80 000) will, as a result of the cap, be able to claim only R15 000, although 25% of R80 000 is R20 000.
Note that the rebate applies only to the PV panels themselves, not to inverters or batteries. It also does not apply to the installation costs.
Installations by landlords or tenants qualify for the rebate, but only the party who pays for the solar panels can claim it.
The following requirements must be met to claim the rebate:
- Only new and unused solar PV panels qualify, “to ensure that the capacity is in addition to what the country already has in place”. The panels can be installed as part of a new system or as an extension of an existing system.
- Only solar PV panels with a minimum capacity of 275W per panel (design output) qualify for the rebate.
- Other components of a system – batteries, inverters, fittings or diesel generators – and installation costs do not qualify.
- Portable panels do not qualify.
- Solar PV panels must be installed at a (primary or secondary) residence that is mainly used by an individual for domestic purposes.
- The installation must be accompanied by a certificate of compliance (CoC) issued in terms of the Electrical Installation Regulations.
- The solar PV panels must form part of a system that is connected to the mains distribution of the private residence.
PV industry is not impressed
The South African Photovoltaic Industry Association (Sapvia) said the benefit of the scheme is limited, and it will not help households that cannot afford to buy a solar kit.
Business Day quoted Sapvia chief executive Rethabile Melamu as saying that the R15 000 cap translates into a saving on the first R60 000 spent on solar panels, which would not make a meaningful impact on the average household without storage.
“Sapvia is on record indicating that an average household tends to purchase a 5kW hybrid system, including panels and battery storage, which ranges from R95 000 to R200 000 depending on the components used,” Melamu said.
How to claim the rebate
Individuals will be able to claim the rebate if they have:
- A VAT invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment.
- A CoC evidencing that the solar PV panels were brought into use for the first time between 1 March 2023 and 29 February 2024.
PAYE taxpayers will be able to claim the rebate on assessment during the 2023/24 filing season.
Provisional taxpayers will be able to claim the rebate against their provisional and final payments.
No claw-back if you sell your home
You will not have pay back the rebate if you sell your home after installing the panels, because the panels are likely to remain fixed to the house and used by the following owner – still enabling an expansion in generation, Treasury said.
However, there will be a claw-back of the rebate if you sell the panels themselves within one year after they were first brought into use.
No provision for sectional title schemes
Treasury said that if residents of sectional title schemes are permitted to instal their own panels, the tax incentive will apply to them as it does to other individuals.
However, body corporates are not eligible to claim the tax rebate.
Treasury said it was unclear whether many body corporates will be purchasing solar installations instead of using leasing or other options to avoid up-front costs for members. The government “will be consulting” on this aspect.
If there is widespread interest in body corporates purchasing and installing solar panels, then payment (for example, special levies) for solar installations levied from the occupants would have to indicate the cost of the solar panels separately – as would be the case for any other claimant. The applicable Certificate of Compliance data would also have to be shared with the South African Revenue Service.
“Because there would be some adjustments to ensure that the right people could claim the right amounts, there will be consultation to determine the required approach and documentation,” Treasury said.
Why are generators excluded?
Treasury said the incentive excludes diesel generators because, although they are often used as emergency back-up, they are not a sustainable solution to generate additional power. Diesel generators increase the demand for fuel and have a negative impact on the environment. Including generators would detract from the climate objectives to which the government is committed, where fiscal instruments such as the carbon tax play an important role.
Why are inverters and batteries excluded?
The incentive excludes inverters and batteries because, although they are required to use solar panels, inverters and batteries can be operated without solar panels – in which case they offer no additional capacity to the system, Treasury said.
“The focus on solar PV panels is to maximise the use of limited government funds to get as much additional generation capacity as possible – and recognises that government will have to focus on a partial rebate of the components that are most directly linked to generation. This is why installation costs are not included either,” Treasury said.
Legislation has yet to be finalised
It is important to note that the legislation governing the tax incentive has yet to be finalised and enacted.
The information Treasury has provided is subject to the outcome of the consultative process on the proposal and Parliament’s ultimate decisions on the legislation.
A draft version of the legislation will be published for public comment no later than the publication date of the 2023 Draft Taxation Laws Amendment Bill. The Minister of Finance tables tax bills during the Medium-term Budget Policy Statement in October each year. Parliament considers the amendments after which the president can assent to the amendments – usually by January of the year after the announcement.
Treasury said the aim of its guidance note and coming draft legislation “is to provide as much upfront clarity as possible so that individuals do not feel they need to wait for the tax bills later in the year before making a decision to invest and benefit from the incentive”.
[…] Read: Here are the Ts & Cs for claiming a tax rebate for installing home solar panels […]
Question, if the individual is entitled to refund before claiming this rebate will the refund increase by this rebate?
Please explain what you mean by “entitled to a refund” – from whom?
I have installed my solar in January, now I don’t qualify, only from March, I’ve been pumping more than 60kw a day into the system, guess I will be purchasing an extra battery so that I can use my power since there is no incentive for me, quite disappointed.
I see the article indicates PV solars panels , does it include MONOCRYSTALLINE PANELS?
National Treasury’s FAQ document does not provide that level of detail.
Yes
Hi. Yes, that monocrystalline panels are also rebate-able?
The legislation does not require a specific type of PV panel to qualify for the rebate.
I’ve just installed the solar system, how do I go about claiming this rebate. It 9 panels and each cost R2999.00. Are solar panels for the geyser qualifies as well. Thanks
According to National Treasury, a draft version of the legislation that will give effect to the rebate will be published for public comment no later than the publication date of the 2023 Draft Taxation Laws Amendment Bill. The Minister of Finance tables tax bills during the Medium Term Budget Policy Statement in October each year. Parliament considers the amendments after which the President can assent to the amendments – usually by January of the year after the announcement.
PAYE taxpayers will be able to claim the rebate on assessment during 2023/24 filing season. Provisional taxpayers will be able to claim the rebate against provisional and final payments. One assumes that the tax returns will include a section for claiming the rebate.
Regarding your question about geyser panels, the requirements for panels to qualify for the rebate include:
Only solar PV panels with a minimum capacity of 275W per panel (design output) qualify for the rebate.
The solar PV panels must form part of a system that is connected to the mains distribution of the private residence.
If solar system was installed in August 2022 I loose out on any claims.
The solars was done through a company.
Please advise
To qualify for the individual rebate for panels installed at a place of residence, the panels must have been brought into use for the first time in the period from 1 March 2023 to 29 February 2024.
Businesses that invest in renewable energy qualify for the expanded section 12B allowance if the investment was brought into use for the first time between 1 March 2023 and 28 February 2025.
[…] Read: Here are the Ts & Cs for claiming a tax rebate for installing home solar panels […]
A comment and question wrt rental properties:
1. The full cost of the entire solar system has always been claimable for rental properties (it’s a cost, not a rebate.)
2. Will rental properties qualify as a business and be able to claim 125%? 125% of what?
The full cost of the renewable energy asset (including installation) plus 25%.
Is this only applicable to taxpayers? I immigrated to SA in 2004 and have no income other than the interest on the amount the bank pays and a small pension from the UK government. I live almost entirely on the capital remaining of the proceed of the sale of my UK house in 2005 which is now almost depleted. In view of this I am not registered for tax either in SA or the UK. Some sites mention a refund and other say a tax refund. Which is it or is it either?
To qualify for the residential solar rebate, you must pay personal income tax in South Africa. It is rebate against a taxpayer’s tax liability. It is applied after assessment of tax owed to Sars.
“A VAT invoice that indicates the cost of the solar PV panels separately from other item …?” What does this mean? The company who installed our solar system has the cost of other items in the invoice including batteries, inverted and installation fee.
The rebate applies only to the PV panels. Therefore, SARS will want to see what was charged for the panels themselves, distinct from the other costs associated with the solar kit (inverter, batteries, etc).
We installed prior to 1 March 2023. Does that mean we cannot claim the rebate in the 2023 tax submission?
Correct, you cannot. The rebate applies to qualifying solar PV panels that are brought into use for the first time from 1 March 2023 to 29 February 2024.
Hi Mark
The IT12 makes provision for claiming under “Other Deductions/Exemption” however when you activate it the only place to claim for solar panels is under “Other” and that is greyed out and one cannot enter anything in there.
Am I possibly missing something here
My understanding is that claims for rebates will be included in next year’s return, as the residential rebate runs from 1 March 2023 to the end of February 2024.
Thank you
Where do I get the application forms
SARS will provide for claiming the rebate in next year’s tax returns.
Hi Mark
The IT12 makes provision for claiming under “Other Deductions/Exemption” however when you activate it the only place to claim for solar panels is under “Other” and that is greyed out and one cannot enter anything in there.
Am I possibly missing something here
The residential solar panel incentive is new panels installed between 1 March 2023 and 29 February 2024. Sars will make provision for claiming the refund in next year’s return.
hi i am on pension uand i dony pay tax anymore (72 years old ) ho i collect the rebaett. i have no taxform do fill out.
A section for the rebate will be included in the 2024 tax return. If you don’t have any taxable income, you won’t be able to claim the rebate.
Hi,
Where on my E-filling do I claim the solar rebate? Options under “other” is greyed out and not accessible.
The solar rebate runs until the end of the 2023/24 tax year. Sars will provide for it in next year’s return.