The eye is all the time within the element, as Chris Yelland and Mariam Isa level out within the article under. Within the high quality print of the Revenue Tax Act, launched in 2016, companies that set up solar energy are permitted to depreciate the asset over three years, 50% of the capital price within the 12 months of commissioning, 30% within the subsequent 12 months, and 20% within the third 12 months. There are just a few different choices talked about. The utmost set up allowed is a system the place lower than 1MW is used for electrical energy era by the enterprise. As a basic rule of thumb, Eskom says every megawatt of a coal energy station’s capability can provide round 650 common houses. And because the power regulator seeks further price hikes, these wins could make a world of distinction to a companies stability sheet. – Stuart Lowman
By Chris Yelland and Mariam Isa*
South Africa’s authorities, power regulator and Eskom have usually been criticised for obstructing the introduction of distributed, small-scale embedded generation (SSEG) which might assist companies to chop prices and make sure the stability of their energy provide throughout load shedding.
However in reality there are vital and far-sighted tax breaks which have been put in place by Nationwide Treasury to encourage and incentivise enterprise homeowners to put in their very own era within the type of grid-tied, rooftop or ground-mounted photo voltaic PV methods on buildings, parking tons, warehouses, factories and farms.
Accelerated depreciation allowances
From 1 January 2016, a little-known modification to Part 12B of the Revenue Tax Act (Act 58 of 1996) permits for depreciation within the 12 months of commissioning of the total (100%) price of a grid-tied photo voltaic PV system of lower than 1MW used for electrical energy era by a enterprise in the midst of its operations.
The capital depreciation allowances for photo voltaic PV methods better than 1MW remained unchanged within the January 2016 modification to the laws, which continues to permit full depreciation over three years. This allows depreciation of 50% of the capital price within the 12 months of commissioning, 30% within the subsequent 12 months, and 20% within the third 12 months.
The accelerated depreciation allowance for photo voltaic PV methods applies whether or not they’re put in for the enterprise by contractors or builders, or paid for by the enterprise in a credit score sale settlement (as outlined in Part 1 of the Worth-Added Tax Act) – both upfront in a single fee or in a number of funds over an prolonged interval.
The price of the photo voltaic PV system allowed for accelerated depreciation consists of its full direct capital price, together with design and engineering, mission planning, supply, foundations and supporting buildings, photo voltaic PV panels, AC inverters, DC combiner bins, racking, cables and wiring, and set up. Finance prices are excluded.
This allowance was confirmed in a binding private ruling by SARS dated 11 October 2018 (BPR 311) in respect of an software by a personal firm in South Africa to make clear the deductibility of the capital expenditure incurred to put in photo voltaic PV methods at various websites owned and leased by the applicant. The methods have been being put in to scale back the corporate’s electrical energy prices.
The improved enterprise case
Whether or not paid for upfront after commissioning, or in a number of funds over an prolonged interval, the advantages of this tax incentive to enterprise homeowners, notably for photo voltaic PV methods of lower than 1MW, are vital.
The place the corporate tax price is 28% and fee is upfront, a 100% tax-deductible depreciation allowance within the 12 months of set up and commissioning will end in a 28% nett low cost on the acquisition worth of the system on the finish of the tax 12 months.
This considerably impacts and reduces the payback interval of a photo voltaic PV mission of lower than 1MW.
Learn additionally: Why concentrated solar power could help ease SA’s electricity woes – Basson
Higher nonetheless, when paying for a similar photo voltaic PV system on a credit score sale settlement by means of a number of funds over an prolonged interval, the transaction might be cash-flow constructive for the enterprise over the lifetime of the photo voltaic PV plant in all however the first months to the tip of the tax 12 months throughout which commissioning takes place.
With these vital tax incentives, and the quickly rising worth of grid electrical energy, the enterprise case for set up of grid-tied, rooftop and ground-mounted photo voltaic PV is quick changing into a no brainer.
Shout out from the rooftops
What’s most shocking, nonetheless, is how few business-owners and corporations are conscious of those tax breaks, which might make such a constructive impression on their cashflow and backside line.
This lack of know-how is maybe a results of the difficulties confronted in accessing related data on the topic from SARS itself.
For instance, efforts to easily obtain or view the up-to-date amended Part 12B of the Revenue Tax Act from the SARS website and the general public web proved fruitless. Equally, no response and even acknowledgement of receipt was acquired to a question despatched to the SARS media desk at firstname.lastname@example.org.
Learn additionally: Sizing up SSEG: Can ordinary citizens beat Eskom at its own game? SA speaks
Solely after a time-consuming search and a paid subscription to a private tax information service provider was this doable.
In an article in Engineering Information on 14 August 2019, entitled “Time to end silence on renewables misinformation – SAPVIA chair”, the brand new chairman of the South African Photo voltaic Photograph-Voltaic Business Affiliation (SAPVIA), Mr Wido Schnabel, stated: “The organisation will grow to be extra assertive in outlining the advantages of photo voltaic for South Africa and in correcting among the prevailing misperceptions concerning the position of variable renewable power within the nation’s future electrical energy system.”
The tax incentives out there to companies for the set up of photo voltaic PV methods is definitely one thing that SAPVIA and different associated business associations ought to be ‘shouting from the rooftops’ within the pursuits of their members, in addition to these of builders, installers and suppliers of photo voltaic PV methods, parts and providers.
Companies which have put in photo voltaic PV within the 2018/19 tax 12 months, or are about to take action, stand to profit considerably. The Council for Scientific and Industrial Analysis (CSIR) estimates that there was near 400MW of put in photo voltaic PV within the nation on the finish of 2017, and that as much as 200MW was put in the next 12 months. With wider understanding of the enterprise case, this may very well be a lot larger in future.
Most of those installations are lower than 1MW – which is all that almost all non-public companies require throughout a variety of sectors of the financial system, together with manufacturing and retail.
If solely the assorted arms of presidency, enterprise, labour and communities have been on the identical web page and dealing with a typical function to deliver the advantages of SSEG to the productive financial system and the atmosphere, to deal with the present electrical energy and water provide constraints, and to facilitate financial progress and the creation of high quality jobs.
- Chris Yelland is an investigative editor at EE Publishers and Mariam Isa is freelance journalist.