Final section 6C solar incentive guide for individuals

Final section 6C solar incentive guide for individuals

• 18 March 2024
• Legal and Regulatory
• South African Accounting Academy

This 17-page guide provides general guidance on the newly introduced solar energy tax credit (for natural persons) under section 6C of the Income Tax Act 58 of 1962, and contains 3 practical examples (where the facts and results are set out in detail).

The tax credit under section 6C is available for a limited period. The aim of this incentive is 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 the years of assessment commencing on 1 March 2023 and ending on 29 February 2024. Thus, the allowance will be available only for one year.

Contents:

• Preface
• Glossary

1. Background 
2. Solar energy tax credit 
   1. The requirements of section 6C 
      1. Persons eligible for the solar energy tax credit 
      2. 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 the solar photovoltaic panels 
   5. Provisional tax 
   6. Disposal of solar photovoltaic panels and capital gains tax 
   7. Income tax returns 
   8. Recordkeeping 
3. Conclusion

• Annexure – The law

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 the solar PV panels

Click here to download the Final Guide:

https://www.sars.gov.za/wp-content/uploads/Ops/Guides/Legal-Pub-Guide-IT37-Guide-on-the-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, an accountant or tax practitioner, you need to be aware of the changes to tax legislation that is 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 have a duty to 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 is brought about by the annual budget speech, as well as guides issued by SARS to provide clarity.

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