In his State of the Nation Address, President Cyril Ramaphosa announced a tax break for the installation of rooftop solar photovoltaic (PV) panels. It is proposed that individuals who install new and unused solar PV panels between 1 March 2023 and 29 February 2024 will be able to claim a tax rebate to the value of 25% of the solar PV panels, capped at a maximum of R15 000 per individual.
Henry Fenn, audit supervisor at Hobbs Sinclair Incorporated unpacks the new solar rebate and explains how it will work:
- only new and unused solar PV panels qualify for the rebate;
- the rebate is not intended for solar installations at business premises, they must be installed at a residence (primary or secondary) that an individual mainly uses for domestic purposes as either part of a new system or as an extension of an existing system;
- the installation must be accompanied by a Certificate of Compliance issued in terms of the Electrical Installation Regulations of 2009;
- solar PV panels with a minimum capacity of 275W per panel (design output) qualify for the rebate;
- the solar PV panels must form part of a system connected to the residence’s main distribution;
- other components of the solar system, such as batteries, inverters, fittings, or diesel generators, do not qualify for the rebate, nor do the installation costs. Portable panels also do not qualify;
- only the individual who pays for the solar panels can claim the rebate. It is essential to note that body corporates are not eligible to claim the tax rebate (for now).
For example, a person buys 10 solar PV panels, at a cost of R4 000 per panel (therefore a total cost of R40 000). That person would be able to claim 25% of the cost up to R15 000, so R10 000. This rebate is deducted from your tax liability rather than a deduction against your taxable income.
To claim the rebate, individuals will need to have a VAT invoice indicating the cost of the solar PV panels as a separate item along with proof of payment, and a Certificate of Compliance, evidencing that the solar PV panels were brought into use for the first time between 1 March 2023 and 29 February 2024 explains Fenn.
PAYE taxpayers can then claim the rebate on assessment during the 2023/24 filing season, while provisional taxpayers can claim it against their provisional and final payments. “There will be a clawback of the rebate if the solar panels themselves are sold within one year after they were first brought into use. However, this will not apply if your home is sold after installing solar panels, because the solar panels are likely to be a fixture used by the new homeowner,” he adds.
Many South African banks consider solar installations a good investment, provided they are installed professionally, comply with relevant regulations, are regularly maintained, and are insured. Banks offer several financing options for homeowners looking to install solar panels. These include adding the cost of solar to a home loan on registration of a bond, extending home loans to cover the cost of installation, or financing solar as a rent-to-buy option or even on a subscription basis.
Fenn says that the tax break on solar panels is an excellent opportunity for individuals to invest in solar power, as it can increase a property’s resale value and attractiveness to potential buyers or tenants. “Solar power is also a step in the right direction towards alleviating South Africa’s electricity crisis while promoting the use of renewable energy sources,” concludes Fenn.