On 22 July 2015, National Treasury released draft tax legislation for public comment, which aims to implement tax proposals that were announced in the 2015 Budget Speech.
For the renewable energy sector, the draft tax legislation has made the following proposals.
Currently, legislation allows for accelerated tax allowances in respect of movable assets used in the generation of energy from solar power, wind, biomass and hydro power of less than 30 megawatts. The tax allowance is granted over a period of three years, on a 50%/30%/20% basis, calculated on the cost of the assets. However, a one year 100% accelerated tax allowance is being proposed for movable assets used in the generation of electricity from photovoltaic (PV) solar energy of less than 1 megawatt. This is to encourage the uptake of embedded solar PVs for self-consumption. The proposed amendment will apply to years of assessment commencing on or after 1 January 2016.
The energy efficiency savings tax incentive is a tax deduction calculated as the kilowatt hours saved (when measuring from a baseline position) multiplied by 45c/kWh. This incentive has been increased to 95c/kWh. The current rate has been deemed insufficient to incentivise energy efficiency projects. The amendment is deemed to come into operation retrospectively, from years of assessment commencing on or after 1 March 2015. Whilst it was announced in the Budget Speech that the accelerated tax allowance, granted on a 50%/30%/20% basis, would extend to hydropower generators of more than 30 megawatts, we note that this has not been proposed in the draft tax legislation.
It should be emphasised that the legislation is only in draft and is subject to change, following public comment and debate.
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