National Treasury clarifies solar panel tax incentives

National Treasury published a brochure of frequently asked questions (FAQs) clarifying the solar panel tax incentive for individuals and the documents that should be submitted with the individual’s tax return.

Beatrie Gouws, head of stakeholder management and strategic development at the South African Institute of Taxation (Sait), unpacks it.

The FAQs indicate that the rebate will only be allowed in respect of “new and unused solar photovoltaic (PV) panels” that are permanently attached (nonportable), with a minimum capacity of 275W per panel (design output), that are purchased outright (no lease to buy arrangements).

Avoid ‘portable’ set-ups

Gouws recommends taxpayers avoid any “portable” set-ups and any lease to purchase arrangements until the draft legislation is released.

According to the FAQs, the rebate is available to any individual taxpayer who has solar PV panels installed at a residence mainly used by an individual for domestic purposes. It is unclear what the position is where two individuals jointly own a home.

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Gouws advises until draft legislation is published, joint owners should be cautious about claiming the rebate. Stating a residence should be used “mainly” by an individual for domestic purposes, would generally mean 50% or more.

It is uncertain whether the “50% or more” will refer to the surface area of the residence or the time-period in the tax year in respect of which the residence is occupied for domestic purposes.

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Where a home is used for part of the year as a home, and is thereafter turned into a business, it is anticipated the “mainly” requirement in this case will be determined based on the period of use of the property during the tax year in respect of which the solar PV panels were installed.

Certificate of compliance

The FAQs indicates a “certificate of compliance”, which qualifies under the Electrical Installation Regulations, 2009, must be provided as proof evidencing the solar PV panels were brought into use for the first time in the period from 1 March to 29 February 2024.

It is unclear who would be the competent authority to issue such a certificate.

The FAQs confirm there will not be a recoupment if the taxpayer sells their home after benefitting from the rebate as the panels are fixed to the home.

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However, if the panels are removed from the home and resold within one year after they were first brought into use, Gouws cautions there will be a recoupment for the taxpayer.

Sars had not responded to The Citizen’s questions by date of publishing. The draft Bills are expected to be released in August for public comment.