How to Save with Solar Tax Incentives

4 Apr

This article will count 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.

Load-shedding has become a way of life in South Africa, and both households and businesses are turning to solar energy for relief. But going green isn’t just good for the planet—it can be great for your clients’ pockets too.

To encourage investment in renewable energy, government has introduced powerful tax incentives under the Income Tax Act. These incentives offer real savings—up to R15,000 for individuals and a 125% deduction for businesses—but only if claimed correctly.

As an accountant, you play a key role in helping clients tap into these benefits. By understanding which tax sections apply—from Section 6C to 12BA, and even diesel refunds under the Customs and Excise Act—you can offer practical, money-saving advice tailored to each client's setup.

Let’s break it down so you can guide them with confidence.

👨‍👩‍👧‍👦 Section 6C: Rebate for Individuals Installing Solar Panels

Section 6C of the Income Tax Act provides a once-off solar energy tax credit for natural persons during the 2023/2024 tax year.

Amount: 25% of the cost of new and unused solar PV panels, capped at R15,000
Section 6C of the Income Tax Act provides a once-off solar energy tax credit for natural persons during the 2023/2024 tax year.
Applies to: Panels installed and brought into use between 1 March 2023 and 29 February 2024
Minimum panel capacity: 275W (watts)
Panels must be mounted or affixed and connected to the main distribution board
Must be accompanied by a valid Certificate of Compliance (CoC) issued under the Electrical Installation Regulations, 2009.

📌 Important Notes:

The incentive excludes the costs of inverters, batteries, installation costs, diesel generators and portable (non-mounted) panels.
You don’t have to own the home—the person who pays qualifies (even a tenant).
Section 6C(4) prevents claiming this rebate if the same solar panels were claimed under Section 12B or 12BA.
The tax benefits will have to be repaid under section 6C if the panels themselves (not the house) are sold within 12 months.

🧾 How to claim

To successfully claim the Section 6C rebate, ensure your client has the following:

📅 When to claim:

A VAT invoice that clearly separates the cost of the solar PV panels from other items
Proof of payment for the panels
A valid Certificate of Compliance (CoC) issued in terms of the Electrical Installation Regulations, 2009.

🏢 Sections 12B and 12BA Deductions for Businesses

Businesses can claim deductions under either Section 12B or 12BA when installing renewable energy systems.

✅ Section 12B – Capital Allowance for Renewable Energy Assets

This benefit applies to equipment used in the generation of electricity from solar, wind, hydropower, or biomass. The assets must be:

Owned by the taxpayer (or under an instalment credit agreement, defined in Section 1 of the VAT Act)
Brought into use for the first time
Used in trade (in the production of income)

Claimable depreciation:
- 100% in year 1 (if ≤ 1MW capacity, PV solar)
- 50% | 30% | 20% for other qualifying equipment.

✅ Section 12BA – Enhanced Deduction (125%)

Section 12BA is effective for the period 1 March 2023 to 28 February 2025, allowing the deduction of 125% of the cost in year 1 relating to new and unused solar systems used in trade.

Qualifying costs include (confirmed in Binding Private Ruling 311):

Panels, inverters, batteries (if part of energy production system)
Mounting equipment
Planning and delivery costs
Labour and safety officers.

🛑 Recoupments

Section 8(4)(a) states that if the asset is sold, its value must be included as income in the year of disposal.
Section 12BA provides that an extra 25% of the asset’s cost is recouped if the asset is sold before 1 March 2026.

🔢 Example:
A R1 million solar system qualifies for a R1.25 million deduction.
This saves R337,500 in tax at the corporate rate (27%).

🏡 Mixed-Use Homes: Self-Employed Individuals

If a client operates a business from home, they may qualify under Section 12BA, but will need to apportion costs between private and business use.

Section 23(m) disallows deductions for most salaried employees—even if working from home—unless they are commission earners or self-employed.

🔢Example 1: Claiming Section 12BA for a Home-Based Business

Let’s say your client, Sarah, is a self-employed graphic designer who works full-time from home. She has a dedicated office that takes up around 30% of her home’s total space. In July 2023, she installs a solar system that includes panels, an inverter, batteries, and full installation, costing R125,000 in total.

Because she runs a registered business from home and uses a specific portion of her house exclusively for that business, she qualifies for the Section 12BA deduction. Since the installation took place within the allowed period (1 March 2023 to 28 February 2025), she can claim 125% of the business-use portion of the cost.

In this case, she can apportion 30% of the R125,000 system for business use, and then apply the 125% deduction to that portion. This results in a sizable deduction against her business income, helping reduce her taxable profit for the year.

She must keep records to support the apportionment—like floor plans or electricity usage—and ensure that the equipment is used in her trade.

📌Note: Sarah cannot claim the Section 6C rebate on the remaining 70% if she has already applied Section 12BA to the business-use portion of the solar installation.

🔢Example 2: No Deduction for Salaried Employees

Now consider Jason, who works full-time from home as a salaried software engineer for a company. Even though he uses a spare room as an office, Section 23(m) of the Income Tax Act disallows him from claiming business deductions like Section 12BA, because he earns a fixed salary and doesn’t run his own trade.

He cannot claim the solar installation costs as a business deduction—even if the setup is similar to Sarah’s. However, he may still qualify for the Section 6C rebate of up to R15,000 if he personally paid for the solar panels and met all the requirements (such as getting a Certificate of Compliance).

📣 Other Important Provisions You Should Know

Beyond the core solar tax incentives under Sections 6C, 12B, and 12BA, several other legislative provisions are relevant when advising clients on solar installations.

Section 102 of the Tax Administration Act places the burden of proof on the taxpayer. This means your clients must be able to substantiate any claim made for a deduction or rebate. For solar incentives, they must retain supporting documentation such as invoices that clearly separate panel costs, proof of payment, and a valid Certificate of Compliance (CoC). Failure to provide this evidence may result in SARS disallowing the claim.
When clients finance their solar systems through a loan or hire-purchase arrangement, Section 24J of the Income Tax Act becomes relevant. This provision allows a deduction for the interest incurred on the borrowed funds—but only if the system is used in the course of a trade. In other words, salaried individuals won't qualify for this deduction unless they are also running a business.
From a capital gains tax (CGT) perspective, Paragraph 20 of the Eighth Schedule to the Income Tax Act allows taxpayers to include the cost of the solar installation in the base cost of their property. This is useful when calculating the capital gain upon the sale of the property, as it can reduce the taxable gain. It's important to note that the Section 6C rebate, being a tax credit rather than a deduction, does not reduce the base cost of the asset.
Where equipment is acquired through financing, it's essential to understand the definition of an "instalment credit agreement" as found in Section 1 of the VAT Act. This definition helps determine whether the taxpayer is deemed the owner of the asset for tax purposes, even if legal ownership only transfers at the end of the payment term. This is particularly important for businesses claiming capital allowances under Sections 12B or 12BA.
Finally, the Electrical Installation Regulations of 2009 require that all solar installations connected to a property’s distribution board must be certified as compliant. A valid Certificate of Compliance (CoC) issued by a qualified electrician is mandatory for individuals claiming the Section 6C rebate. Without this certificate, the installation will not be recognised for tax purposes, even if all other requirements are met.

These provisions work hand-in-hand with the solar incentives, and understanding them ensures that your clients remain compliant while maximising their tax benefits.

🚜 Diesel Refunds and Generator Deductions for Primary Producers

If your clients operate in sectors like farming, forestry, or mining, they may qualify for a diesel fuel levy refund—a valuable but often overlooked benefit.

🔁 Claiming Back Diesel Levies

Under Schedule 6, Part 3 of the Customs and Excise Act, businesses engaged in primary production activities can claim a refund of the General Fuel Levy and the Road Accident Fund (RAF) Levy on eligible diesel purchases.

These refunds are claimed directly via the VAT201 return, but only once the client is registered for the diesel refund scheme.

💸 How much can be claimed?

RAF Levy at R2.18 per litre
General Fuel Levy at R3.70 per litre
Refund rate up to R3.66 per litre on 80% of qualifying diesel purchases

To access this refund, clients must submit SARS form VAT101D to register.

🧾 Wear and Tear Deductions for Generators

In addition to the diesel refund, clients can also claim capital allowances for the cost of diesel-powered generators used in their operations:

Section 11(e) of the Income Tax Act allows a 5-year write-off for portable generators and 15 years for standby generators used in general trade.
Section 12C: If the generator is used directly in manufacturing, accelerated allowances apply of 40% in year 1 applies, followed by 20% per year for the next three years.

📒 Recordkeeping Requirements (Logbooks)

To support refund claims, SARS requires businesses to maintain detailed diesel usage records, including: