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Understanding Government’s Renewable Energy Generation Tax Incentive

You have until March 2025 to take advantage of the enhanced renewables tax incentive.

The South African government last year introduced a generous tax incentive to spur immediate private investment in renewables, and to support businesses that might not have been able to invest in renewable energy without it.

Any taxpayer conducting business activities can claim this incentive, which allows you to deduct 125% of the cost incurred in acquiring qualifying assets.

What type of assets qualify for the incentive?

A very broad range of generating assets is covered, including:

  • wind power
  • solar energy
  • biofuel
  • hydropower

as well as supporting infrastructure, and may include storage assets, such as batteries.

You could in some circumstances even claim the deduction where you lease out an asset to a party who then uses it to generate power.

How much time do I have?

You have until 1 March 2025 to bring your assets online.

How could I take advantage of the incentive?

Any business harnessing renewable energy assets for income can benefit from the incentive, including through PPAs or operational leases.

Because the incentive only applies to new assets, you’ll want to move quickly with a strong project pipeline.

If you are a limited partner invested in a fund (for example, in an en commandite partnership), you can deduct your share of the partnership’s tax deductions and allowances when calculating your taxable income. Our panel members are also helping funds get off the ground rapidly to take advantage of this investor windfall.

Are there any other qualifications?

Not many. You or your business:

  • must have brought the new and unused asset into use on or after 1 March 2023
  • must own the asset outright or acquire it by way of an instalment sale
  • must use it to generate income

If you sell the asset before 1 March 2026, SARS will recoup an additional 25% of the cost of the asset that you are offloading.

Caveat will get your transactions across the line in time.

At Caveat, our panel members have both legal and accounting tax expertise, ensuring we offer services that are both legally and financially sound. Ensure that you have the Caveat team at your side when it comes to taking advantage of the section 12 BA Income Tax Act renewables incentive.

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