Source: Cristian Rojas/Pexels
The details of these proposed taxes are outlined in a new draft guide and public comment is due by 30 August 2024.
Under Section 12B: Accelerated Depreciation for Renewable Energy Assets, businesses can deduct the cost of equipment used to generate electricity from renewable sources faster than usual.
For most equipment, businesses can deduct 50% of the cost in the first year, 30% in the second year, and 20% in the third year.
For small solar energy systems, businesses can deduct the entire cost in the first year.
Section 12BA: Enhanced Deductions for New Investments allows businesses to deduct 125% of the cost of new and unused equipment bought between 1 March 2023 and 1 March 2025.
This provision makes new investments in renewable energy more attractive by offering substantial financial benefits.
Section 12U: Deductions for Infrastructure Development enables businesses to deduct the costs associated with building roads and fences necessary for large renewable energy projects (over 5MW).
This deduction supports the development of essential infrastructure for significant renewable energy ventures.
Limited types of renewables covered
The tax incentives are available for generating electricity from wind, solar, hydropower (up to 30MW) and biomass.
These tax incentives are part of South Africa’s broader plan to reduce its reliance on fossil fuels and lower greenhouse gas emissions.
By making renewable energy projects more financially attractive, the government hopes to encourage more investment in this sector, create jobs, and support sustainable economic growth.
