News24 | You’ve installed solar panels

• Last year, SARS introduced a solar energy tax credit to encourage home and business solar installations.
• If you haven’t yet installed home solar, it’s too late.
• But there’s still a chance to claim some sizeable benefits for business tax installations.
• For more financial news, go to the News24 Business front page.

In 2023, Finance Minister Enoch Godongwana introduced a tax rebate for individuals and businesses who install solar panels. The move was designed to incentivise home and business solar installations and reduce the pressure on the national grid.

“One of the primary advantages of the solar rebate is its ability to lower taxable income. Individuals or businesses who have invested in qualifying solar energy projects can deduct a portion of their capital expenditure from their taxable income, leading to a reduction in the overall tax liability,” says Michael Rushby, a director at accounting firm Galbraith Rushby,

There are, however, two distinct incentives that are markedly different in incentives and timeframes. 

Claiming for home solar installations

Although there was an initial excitement about claiming some returns for home-based solar installations, much of this has faded. And individuals who haven’t yet installed and activated their household solar system have all but lost out.

The residential tax rebate announced in February last year was in place for a single year, which means it ended in February this year.

According to Matthew Cruise, energy expert at Forest Energy, your home solar system needs to be active and fully operational by 28 February 2024 to file it in your tax returns for the past tax year.

The individual tax benefit was for 25% of the value of solar panels, which Cruise says typically only account for 20% to 25% of the cost of an overall solar system.

Rushby says if the cost of the home installation is R150 000, 25% of which is panels, then panels would be R37 500, and the rebate equal to R9 375.

Still, SARS capped the total rebate for home solar at R15 000, which means that even large installations with many more panels would not be able to claim more than this.

Interested parties who want to claim this back from SARS must indicate the cost of PV panels when submitting ITR12 tax returns for 2024. SARS will then calculate the rebate for you.

Together with the ITR12, homeowners must submit several supporting documents. These include an Electrical Certificate of Compliance (COC), an invoice and proof of payment from the solar installer, proof of installation date and the date of first use, and evidence that the panels are for a residence used mainly for domestic purposes.

If not already available, the installing solar company should be able to assist with some of these documents, but Cruise points out that many small operators, and even some bigger ones, have since disappeared.

The SARS website has a comprehensive overview of the rules and requirements regarding claiming back on home solar installations.

Claiming for businesses

There’s somewhat better news for businesses looking to benefit from the solar tax incentive – in terms of timing and rebate.

The solar rebate announced last year also included a business component applicable for two years rather than one. Any business that installs and activates solar panels at its premises before the end of February of next year is, therefore, eligible for the rebate.

“Currently, businesses get a 125% deduction on whatever they invest, so if they invest R100 000, they get a tax deduction of R125 000 – with no maximum amount,” says Rushby.

According to Rushby, a business with R2 million in earnings can achieve a 12B allowance of R250 000. By lowering the taxable income to R1.75 million, a company with this profit will be taxed roughly R100 000 less.

Cruise also points out that, unlike home installations, the business rebate is for the installation’s total value, which includes supporting structures, batteries, and wiring.

“With the 125% rebate in place, in real terms, when your corporate tax rate is 27%, it will work out to 33.75%, or a third of the value of the entire system that can be tax deducted. The returns are pretty decent there,” says Cruise.

According to Cruise, a system that costs a business around R1 million can result in a tax saving of up to R330 000, coupled with the benefit of mitigating rising electricity tariffs.

The result of this, Cruise says, is that while the number of home installations often rises as load shedding increases, businesses are using the incentive to see the longer-term benefits of a substantial solar investment.

“We see the tax rebate as a massive incentive for businesses to install solar, with many companies signing up for solar and wanting to get their installation done before 29 February as a result,” Cruise says.

The application process for company solar rebates is similar to that of individuals. To be eligible for the full rebate, businesses must own the solar installation installed between March 2023 and February 2025. It must also be used in the production of income.

Given the greater complexity of the company rebate, both Cruise and Rushby recommend using professional services from a reputable solar company and an accountant to ensure maximum compliance and returns.