South Africa made local power history following an announcement of new tax Incentives from the Minister of Finance. The South African government will now be introducing this incentive to households that install new solar panels during the period of 1 March 2023 to 29 February 2024. The announcement calls for the reshuffling of the legislature to ease the burden that taxpayers are currently experiencing following the country’s regular rolling blackouts also referred to as load shedding. However, the reasons behind these new Solar Panel Tax Incentives run beyond the taxpayer and have roots in easing the current strain on South Africa’s energy grid. As of 1 March 2023, residents can apply for their solar panel rebate to convince homeowners to immediately install solar power rather than postpone the decision or wait for the legal process to be outlined.
Tax incentives and the increased demand in households:
Any individual who pays personal income tax is eligible to claim the rebate against their tax liability. The incentive is aimed directly at homeowners rather than business premises as a separate budget has been outlined for the expansion of the renewable energy tax incentive for businesses.
An impressive rebate of 25 percent (%) will be granted by the government on the cost of new and unused solar photovoltaic (PV) panels. Households can however only claim a maximum value of R15 000 per individual. With the newly implemented incentive, the South African government is optimistic that South Africans will be more willing to invest in clean electricity generation sooner rather than later.
As households revert to generating their own renewable energy for private consumption, we expect to see an exponential increase in demand for solar panels, components and battery storage. The spiked demand amongst South African residents, will create a big opportunity for foreign investors looking to expand their solar business into Africa. The need for affordable and quality solar products is a need which is developing faster than technology can keep up, therefore creating a valuable gap in the market for foreign solar companies.
Solar Tax incentive qualifying requirements:
The incentivized rebate has got South African households eager to convert to solar power but residents need to be mindful of the qualifying requirements set out below:
- The rebate is solely applicable to solar PV panels that are bought into use for the first time during the period of 1 March 2023 to 29 February 2024.
- The PV panels are the only components of the system which qualify.
- Solar PV panels must be installed at a residential address which is used for domestic purposes.
- The installation must be supported by a certificate of compliance in terms of the Electrical Installation Regulations of 2009 to ensure the safety of the installation and local compliance with energy regulations.
- Only new and unused solar PV panels are eligible to ensure that the capacity is in addition to what the country already has in place. These panels can be installed as part of a new system or as an extension of an existing system.
Why has the government only incentivized Solar PV panels:
While there are many alternative methods to generate electricity to combat the rolling power cuts government will only be granting tax incentives to the installation of solar. In past years, the alternative and most popular solution for households has always been generators. Generators are often used as emergency backup power however; this is not a sustainable solution to generate additional power. This is because the use of diesel generators increases the demand for fuel and inevitably will lead to negative environmental impacts. By promoting the use of generators, a major contradiction will be introduced as this would detract from the climate objectives which the South African government is committed to where fiscal instruments, such as carbon tax, play an important role.
The focus of the newly implemented tax incentives are therefore solely aimed at solar PV panels to maximize the use of renewable energy to gain as much additional generation capacity as possible. While the solar set-up includes additional components such as an inverter and batteries to run efficiently, households will not receive any incentives for the additional components.
How will the incentive impact the country’s tax legislation?:
The amendment will be included in the 2023 Draft Taxation Laws Amendment Bill which will be made available to public sources. The minister of finance was adamant to provide as much upfront information as possible to speed up the process of households converting to solar energy and being less dependent on the country’s energy grid. This vital information was laid out to aid clarity and ensure that taxpayers do not wait for the tax bills to be published later in the year and instead seize the moment to benefit from this incentive.
With this new incentive taking center stage in South African news, foreign investors wishing to make use of this opportunity will need to act swiftly to “get a piece of the action” and seize a market which is only set to improve with the electricity situation. InterGest South Africa is an outsourced service provider focusing on assisting foreign entities to enter the African market. With 20 years of experience, our team of experienced professionals, are ready to assist you with quick and effortless market entry. Whether you are looking for a sales partner, a reliable warehouse or to set up a company in South Africa, we have the perfect cost-effective solution for you. For more information, we will gladly set up a cost and obligatory free consultation to assist you with entering the market.
Simply send an email to contact@intergest.co.za or visit our website https://intergest.co.za/
