Solar panels (Dali-E)
The renewable energy incentive proposed by Finance Minister Enoch Godongwana in the 2023 Budget, has generated much discussion. The tax incentive for individuals who invest in rooftop solar photovoltaic panels is intended to improve energy efficiency, reduce pressure on the grid and encourage investments in clean energy generation.
On 21 April 2023, after two months of speculation and uncertainty as to how this incentive would be implemented, National Treasury and SARS released the first batch of the draft National Legislation.
What solar panels qualify?
This proposal will allow individuals who pay personal income tax to be granted a solar energy tax credit for the following solar panels:
- New and unused solar photovoltaic panels that are put to use for the first time between 1 March 2023 and 1 March 2024;
- Solar photovoltaic panels with a generation capacity of not less than 275W per panel;
- Solar photovoltaic panels that are part of a system connected to the distribution board of a residence. This applies to a residence which is mainly used for domestic purposes (not to a building used mainly for business purposes);
- The installation of the solar photovoltaic panels must be issued with a certificate of compliance in terms of the Electrical Installation Regulations of 2009.
The solar energy tax credit allowed as a deduction will be limited to 25% of the cost of the solar photovoltaic panels, up to a maximum of R15 000.
What is excluded?
Unfortunately, the tax relief provided by the proposed legislation does not offer any relief to taxpayers who brought their solar systems into use before 1 March 2023. Furthermore, the tax credit is only applicable to the fixed panels themselves – not the cost of installation, or the cost of other components (like batteries and inverters). It also doesn’t apply to portable solar panels.
Understandably, the rooftop solar incentive doesn’t apply to solar photovoltaic panels that have already been granted a deduction through any other provision of the Act (such as section 12B and section 12BA which apply to commercial projects).
Who can claim the tax credit?
This incentive will apply to individuals who are covering the cost of purchasing the new and unused solar photovoltaic panel, and installing them at the residence they own, rent or occupy. To apply for the tax rebate you will need to have the invoice, which must show the cost of the panels themselves, and the certificate of compliance. And as always, you will need to have your proof of payment in order to claim.
The panels belong to the house
If you claim the tax incentive and then sell the solar photovoltaic panels before 1 March 2025, the value of the rebate will be added to your normal tax payable. Conversely, if you leave or sell the residence to which the solar photovoltaic panels are affixed, you cannot claim any compensation for the loss of the panels.
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