SARS: Draft Guide Allowances and deductions re renewable energy generation assets

SARS: Draft Guide Allowances and deductions re renewable energy generation assets

• 06 August 2024
• SARS Issues
• South African Accounting Academy

In order to promote investment in renewable energy technologies and potentially reduce South Africa’s dependency on coal, various tax incentives have been introduced in the form of deductions and accelerated capital allowances. Section 6C, section 12B(1)(h) and (i), section 12BA and section 12U were introduced with the intention of promoting the generation of electricity from specified sources of renewable energy.

This draft guide includes 10 useful examples and provides general guidance on the tax incentives available for the generation of electricity from specified sources of renewable energy under section 12B(1)(h) and (i), the enhanced form of this deduction under section 12BA and the deduction under section 12U for amounts actually incurred on the construction of any road, the erecting of any fence and a foundation or supporting structure designed for such a fence as well as on the cost of the improvements to any road, fence or foundation or supporting structure that are used for the generation of electricity from specified sources of renewable energy.

Contents of guide:

1. Background
2. Qualifying criteria – sections 12B, 12BA and 12U
3. Foundations or supporting structures
4. Improvements to assets and foundations or supporting structures
5. The cost of the renewable energy asset
6. Calculating the deduction under the respective sections
7. Prohibitions of deductions
8. Requirements specific to section 12B
9. The application of some of the other sections of the Act in relation to sections 12B, 12BA and 12U

10. Conclusion

    Annexure – the law

Comments are due by 30 August 2024.

Click here to download the Draft Guide.

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, so that your clients may benefit from these renewable energy incentives.
• Tax practitioners should always take note of guides issued by SARS to provide clarity – so that they may be able to advise their clients accordingly.
• As a tax practitioner and taxpayer, you also need to comply with Sections 12B, 12BA and 12BU of the Income Tax Act.

Relevance to Your Clients:

• Taxpayers have a duty to comply with Sections 12B, 12BA and 12BU 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, so that your clients may benefit from these renewable energy incentives.
• Taxpayers should always take note of guides issued by SARS to provide clarity.

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