To date, solar power adoption in the private sector has been relatively slow. This is mainly due to the fact that the cost poses a significant barrier for most households and small businesses. Now, in light of the continued energy shortage that will not be resolved in the near future, according to Eskom, the South African government is attempting to speed up the switch to renewable energy sources by providing some relief and incentives in the form of solar tax breaks to make it more affordable.

Solar tax breaks for individuals

Up to now, current tax laws have only made provision for incentivising businesses. In a shift to accommodate individuals in an attempt to provide a tax break for individuals and households, the National Treasury has proposed a tax incentive for individuals who install solar panels between 1 March 2023 and 29 February 2024.

All individuals who install solar panels during this period will qualify for a tax rebate of 25% – up to a maximum of R15 000 – on the cost of solar panels. It is important to note the following:

● This rebate does not include the cost of batteries, inverted or installation
● A solar panel must have a minimum output of 275 W to qualify
● The installation must be accompanied by a Certificate of Compliance

Tax incentives for businesses

Businesses have been able to deduct the investment costs in qualifying wind, solar, hydropower , biomass and photovoltaic (PV) projects above 1 MW as follows:

● 50% in year 1
● 30% in year 2
● 20% in year 3

Since 2016, investors in PV projects below 1 MW benefited from an accelerated depreciation allowance, being able to claim back 100% in one year.

Now, under the new provision, a business can claim back up to 125% in year one for all types of renewable energy investments, regardless of the output. This will only apply to new investments made between 1 March 2023 and 28 February 2025. For any information pertaining to your solar tax breaks in South Africa, contact the team from Switch Electrical today.