Section 12B of the Income Tax Act was introduced in 2016 with the intention of incentivising the private market to invest in various sectors of the economy through a tax benefit, one of the focus areas being renewable energy.
The incentive from a taxpayer’s perspective is that the taxpayer can deduct the investment against his/her/its taxable income in the year of investment. Originally 100% of the investment was tax-deductible, however, as of this year (and for the next two years), National Treasury increased the deductibility of the investment to 125% of the investment amount.
Section 12B, like Section 12J, provides investors with the opportunity to claim a tax deduction on their investment. Where Section 12B differs from Section 12J is that the deductibility of a Section 12B investment is 125% of the investment amount vs 100% in the case of a Section 12J investment.
For instance, if an investor in the top tax bracket invests R1 million in Jaltech’s Tax-Deductible Solar Investment, they can reduce their taxable income by R1.25 million, resulting in a tax refund or savings of R562,500. The deduction of 125% is applicable for reducing the investor’s taxable income and subsequently their liability for income tax and/or capital gains tax.
Section 12B allows for a tax benefit where a taxpayer invests in solar equipment with the intention of generating income/return from the investment. The taxpayer becomes eligible for the benefit in the year the solar equipment becomes operational. To qualify for the incentive, the investment must be made with the aim of earning income/returns from the sale of electricity, and not from personal energy consumption.
It’s a common misunderstanding that only companies can benefit from the Section 12B incentive. In fact, the legislation states that all taxpayers, including individuals, companies, and trusts, are eligible.
Jaltech is presenting South African investors with the opportunity to take advantage of the energy supply crisis in South Africa and to gain exposure to an asset class which provides long-term predictable yields and reap the considerable tax advantages connected to Section 12B via Jaltech’s Tax-Deductible Solar Investment.