Have you considered a solar energy solution for your business?
Your business is at the mercy of Eskom – that’s not news. But there is a solution that’s become too appealing to ignore… Solar Energy. What makes the switch to solar even more viable, is the fact that South African businesses can qualify for a solar energy tax break.
Use solar energy tax breaks to boost your returns!
Section 12B of the Income Tax Act (No 58 of 1962) was amended in 2016 in order to make an allowance for the depreciation of specific solar installations.
The accelerated depreciation allowance, as per the amendment, applies to solar systems that generate 1MW or less. It enables businesses to claim 100% depreciation in the year the system is commissioned.
What criteria do companies need to meet in order to qualify for tax breaks?
As outlined in the Act, three critical requirements must be met to benefit from tax breaks:
- The claim must be made in the same tax year that the system was commissioned
- The system must either be a roof top system, a grid-tied system or a ground-mounted system
- The energy generated from the solar system must be used for business purposes only
The fine print…
Company tax in South-Africa is 28%. With this in mind, you can deduct the value of your new solar power system as a depreciation expense from your company’s profits. Essentially, this means that your company’s income tax liability will be decreased by the same value as the value of the installed solar system. Therefore, it is the same as getting a 28% discount on the price of your solar system!
Great news - the tax break is applicable for all costs of the system, and its installation. This is also inclusive of the cost for components such as panels, AC inverters, DC combiner boxes, racking, cables and wiring. Installation and delivery costs are included too!
Moreover, tax breaks apply whether you pay for the solar system upfront or on credit. However, the break does not include financing.
What do tax breaks mean for companies?
Tax breaks help businesses free up cash flow, which is a much-appreciated benefit in a tough economic climate.
Solar equipment will pay for itself, in a few years. Moreover, the combination of getting energy for ‘free’, recouping costs via breaks, and no longer spending as much on grid power, makes the switch to solar an obvious choice.
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