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Tax: Credits from power fed back into the electricity grid
- 23 June 2023
- Accounting
- South African Accounting Academy
This draft guide provides general guidance on the tax treatment of credits due to taxpayers for excess power generated from renewable energy sources and exported via the grid. Guidance is also provided on the tax treatment of the various expenses that are incurred by the taxpayer in generating such electricity.
Both natural and juristic persons are eligible to participate in the net-billing tariff.
Under the draft net-billing rules, participating taxpayers may receive export credits under a connection agreement for excess power generated from renewable energy sources, and that is exported via the power grid provided that such customer’s electricity generation is synchronised with the grid. The taxpayer does not sell the excess power and is, at all times, the owner of the energy that is generated and exported. No payment is, thus, received by the taxpayer for the exported power.
Qualifying taxpayers are called a “prosumer”, which means a customer that has entered into an agreement with a distributor and generates electricity on their side of the billing meter with an embedded generation facility that is primarily intended to offset part or all of their electricity requirements, provided that, for a non-household customer, those activities do not constitute its primary commercial or professional activity.
Comments are due by 30 June 2023.
Click here to download the Draft Guide:
Relevance to Auditors, Independent Reviewers & Accountants:
- The Income Act is yet another piece of legislation that your clients should consider, so that they are aware of their rights and responsibilities with specific references to taxpayers’ ability to challenge the legality of actions and decisions within the tax system.
- Taxpayers regarded as a “prosumer” is a customer that has entered into an agreement with a distributor and generates electricity on their side of the billing meter with an embedded generation facility that is primarily intended to offset part or all of their electricity requirements, provided that, for a non-household customer, those activities do not constitute its primary commercial or professional activity. Prosumers should be fully aware of the contents of this guide.
Relevance to Your clients:
- A taxpayer should be aware of the contents of the Income Tax Act.
- Taxpayers regarded as a “prosumer” is a customer that has entered into an agreement with a distributor and generates electricity on their side of the billing meter with an embedded generation facility that is primarily intended to offset part or all of their electricity requirements, provided that, for a non-household customer, those activities do not constitute its primary commercial or professional activity. Prosumers should be fully aware of the contents of this guide.
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