Understanding Section 12B of the Income Tax Act

How can you benefit?

1. By taking advantage of this incentive, you can deduct the value of your new solar power system as a depreciation expense from your company’s profits.
2. This deduction reduces your company’s income tax liability by the same value as the installed solar system.
3. Additionally, this reduction can be carried over to the next financial year as a deferred tax asset, resulting in a direct saving of 27% on the purchase price from day one of installing the solar system.

What types of purchase options qualify?

The following purchase options qualify for the accelerated depreciation allowance:

1. Outright cash purchase.
2. A credit sale agreement with multiple payments over an extended period. This arrangement can make the transaction cash-flow positive for the business from Year 1, as the company effectively receives a ‘rebate’ from SARS.

All major banks have recently extended their financing terms to between 84 and 120 months (7 to 10 years).

What costs are covered?

The cost of the solar PV system allowed for accelerated depreciation includes its full direct capital cost, which encompasses:

• Design and engineering.
• Project planning and delivery.
• Foundations and supporting structures.
• All solar equipment.
• Racking, cables, and wiring, including installation costs.

Contact us below for a proposal on achieving energy independence in the most tax-efficient manner.