Encouraging efficient utilisation of energy through the Income Tax Act

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February 2014 News

The long awaited tax allowance for energy efficiency savings was promulgated during November 2013 with the effective date notified as 1 November 2013 and is set to provide impetus to the development of the energy efficiency and Measurement and Verification (M&V) industries in South Africa.

The Minister of Finance, Pravin Gordhan, in consultation with the Minister of Energy and the Minister of Trade and Industry, published the signed notice of the effective date of the Regulation in Government Gazette Notice no. 855 of 8 November 2013 as 'Regulations in terms of Section 12L of the Income Tax Act, 1962, on the allowance for energy efficiency savings' and declared such to come into operation on 1 November 2013.

More recently, on 9 December 2013 the said Regulation 12L was promulgated and stipulates the allowance is for the purpose of determining the taxable income derived by any person from carrying on any trade in respect of any year of assessment ending before 1 January 2020. It stipulates that there must be allowed as a deduction from the income of that person an amount in respect of energy efficiency savings by that person in respect of that year of assessment. It should be noted that ‘a person’ referred to in this instance is a tax entity and in effect means that the energy efficiency allowance is not restricted to any industry, sphere of business, or any project and specific energy efficiency initiative – in a nutshell, if you are paying tax you can claim the allowance within the boundaries stipulated in the 12L Regulation. The allowed deduction is calculated at 45c/kWh for verified energy efficiency savings.

The most significant requirement to take cognisance of is that a baseline for the savings should be set by an M&V Professional under the auspices of an M&V body accredited by SANAS in accordance with SABS/SANS 50 010:2011.

With energy efficiency being an intangible commodity until it is assigned quantification through a protocol as within the M&V process, formalised in the M&V national standard SABS/SANS 50 010:2011, it is important to take cognisance of the definitions stipulated in the Regulation to logically separate what is part of the 12L allowance and what is not.

The full article outlining what can be claimed, what is not claimable, who can issue reports and where to find these persons and companies, what should be on the certificate for SARS, the steps to start the claiming process, where to log your intention to start claiming tax can be downloaded at http://instrumentation.co.za/+C18549. Alternatively scan the QR code from your mobile device.

For more information contact The Energy Training Foundation, +27 (0)41 367 1041, [email protected], www.energytrainingfoundation.co.za

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Encouraging efficient utilisation of energy through the Income Tax Act

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