Income tax and capital gains tax liabilities can be significant, particularly where assets (shares, property, etc.) have been disposed of during the year. The Income Tax Act provides a number of legitimate mechanisms that allow taxpayers to structure investments in a manner that reduces taxable income and improves after-tax outcomes.
Retirement Annuity Contributions
Retirement annuity investments have, for decades, been one of the most commonly used methods of reducing income tax. Contributions to a retirement annuity are deductible up to 27.5% of remuneration or taxable income, subject to an annual cap of R350,000.
For a taxpayer in the highest marginal tax bracket, a maximum retirement annuity contribution can reduce tax payable by up to approximately R157,500. While effective, this strategy is constrained by annual contribution limits and imposes long-term restrictions on access to capital, as funds are generally locked in until retirement age.
Section 12B Solar Investment
Another mechanism available to reduce taxable income is an investment that qualifies for a deduction under Section 12B of the Income Tax Act. Section 12B allows taxpayers to claim a deduction in respect of qualifying solar assets used in the production of income.
Where structured appropriately, this deduction may be used to offset taxable income, including income arising from capital gains, thereby reducing or eliminating tax payable at the end of February (see investment option further below).
Retirement Annuity vs Section 12B Solar Investment
| Category | Retirement Annuity (RA) | Section 12B Solar Investment |
| Tax types addressed | Income and capital gains tax | Income and capital gains tax |
| Tax deduction | 100% | 100% to 230% (with gearing) |
| Investment term | Locked in until retirement age (55) | Typically 8–10 years |
| Liquidity | Very low – restricted until retirement | Moderate – structure dependent |
| Limits on amount | 27.5% of income capped at R350,000 p.a. | No investment cap |
| Risks | Market and regulatory risk | Operational and offtake risk |
| Underlying assets | Equities, bonds, property, cash | Physical solar assets |
| Exposure to government interference | High | Moderate |
Jaltech’s Section 12B investment
Jaltech’s sixth Section 12B investment enables taxpayers to claim a tax deduction of up to 230% of their investment amount.
This is achieved through a leveraged structure (equity-to-debt), allowing a 100% deduction on the capital invested plus an additional 130% deduction linked to the associated debt contributions. Depending on the taxpayer’s marginal tax rate, the investment can deliver tax savings, in the form of refunds or reduced liabilities, that exceed the original investment amount.
This opportunity builds on Jaltech’s established Section 12B track record, with more than R1 billion deployed across over 250 solar assets and more than 700 investors having successfully realised their tax benefits to date.
If you are interested in investing, please email Chris McCormick at chrismc@jaltech.co.za for further information or to arrange a call.
