Draft SARS Guide for Solar Energy Tax Credit

Draft SARS Guide for Solar Energy Tax Credit

• 15 February 2024
• Tax
• South African Accounting Academy

This draft guide provides general guidance on the newly introduced solar energy tax credit under section 6C of the Income Tax Act 58 of 1962.

Comments were due by 9 February 2024.

The tax credit under section 6C is available for a limited period. This incentive aims to encourage and promote renewable energy in households thereby reducing the pressure on the national electricity grid. 

Section 6C applies only to natural persons meeting the strict requirements and for years of assessment commencing on 1 March 2023 and ending on 28 February 2024. Thus the allowance will only be available for one year.

Contents of the draft guide:

1. The requirements of section 6C:

• Persons eligible for the solar energy tax credit

• Solar photovoltaic panel requirements:

1. Solar photovoltaic panels must be “new and unused”

2. Generation capacity of solar photovoltaic panels

3. Solar photovoltaic panels must be “brought into use for the first time”

4. Installation requirements of the solar photovoltaic panels

2. Allowable amount of tax credit

3. Prohibition of double deductions

4. Multiple persons incurring the cost of solar photovoltaic panels

5. Provisional tax

6. Disposal of solar photovoltaic panels and capital gains tax

7. Income tax returns

8. Recordkeeping

Examples are provided in the guide on:

• Example 1 – The requirements “new and unused” and “brought into use for the first time

• Example 2 – Allowable amount of solar energy tax credit

• Example 3 – Multiple persons incurring the cost of solar PV panels

Click here to download the Draft Guide:

https://www.sars.gov.za/wp-content/uploads/Legal/Drafts/Legal-LPrep-Drafts-2024-02-Draft-Guide-Solar-energy-tax-credit-provided-under-section-6C.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• The Income Tax Act is yet another piece of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (Non-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.

• As an auditor, independent reviewer, accountant, or tax practitioner, you need to be aware of the changes to tax legislation that are brought about by the annual budget speech, as well as guides issued by SARS to provide clarity.

• As a tax practitioner and taxpayer, you also need to comply with Section 6C of the Income Tax Act.

Relevance to Your Clients:

• Individual taxpayers must comply with Section 6C of the Income Tax Act, otherwise they could be held liable.

• It is important to be aware of the changes to tax legislation that are brought about by the annual budget speech, as well as guides issued by SARS to provide clarity.

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