Everyone talks about the ‘section 12b allowance’ but we noticed not a lot of people are aware of this fact or know what it is.

South Africa is a country that flourishes with perfect year round weather conditions for PV Solar systems. The South African government has given the opportunity for companies to take advantage of this fact and opened the door for us to become world leaders in Renewable Energy systems and reduce our greenhouse gas emissions. How would you ask? They have amended Section 12B of the Income Tax Act No. 58 of 1962 to include Photovoltaic and other renewable sources. Section 12B covers assets used in the generation of electricity and was introduced to encourage investment in renewable energy in SA. This section allows a deduction equal to 100% of the cost of your solar system in the year of assessment in which the system was first brought into use.

solar 12b

In short, you can claim the cost of the solar project against your company income tax of 28%, for the latest information regarding this always consult with your bookkeeper as from the time of this article to the time of you reading this, the legislation might have been amended.
Some key points to keep in mind when taking this route:

  • The system must be brought into use for the first time, so you can’t claim again for a system already used, or claim twice on the same system. This doesn’t stop you from claiming again as you’ll have a system being brought into first time use again.
  • Assets that can be claimed under the generation of electricity from solar energy, include photovoltaic (PV) panels, combiner boxes, inverters, batteries, cabinets, supporting structures, and transmission up to the distribution boards.
  • The generation of electricity can be from wind power, photovoltaic solar energy or concentrated solar energy.

This section 12b promotes companies to invest in renewable energy hugely and not using the opportunity will certainly be a loss to themselves. When taking this route it is important to use a reputable EPC company that ensures your PV assets have the best efficiency to cost ratio who adheres to the maintenance schedules and upholds the warranty conditions from installation time till end of life date. Going green is an investment which benefits companies greatly, we back that investment by ensuring it stays optimised throughout its projected lifetime.