Guide on the Solar Energy Tax Credit
Provided under Section 6C
Income Tax
Guide on the Solar Energy Tax Credit Provided under Section 6C
i
Guide on the Solar Energy Tax Credit Provided under Section 6C
Preface
This guide provides general guidance on the newly introduced solar energy tax credit under
section 6C of the Income Tax Act 58 of 1962.
It does not consider the technical and legal detail that is often associated with tax, and should,
therefore, not be used as a legal reference.
This guide is not an “official publication” as defined in section 1 of the Tax Administration
Act 28 of 2011 and accordingly does not create a practice generally prevailing under section 5
of that Act. It is also not a binding general ruling under section 89 of Chapter 7 of the same
Act. Should an advance tax ruling or a VAT class ruling or VAT ruling under section 41B of
the Value-Added Tax Act 89 of 1991 be required, visit the SARS website for details of the
application procedure.
This guide is based on the legislation as at date of issue.
All acts, explanatory memoranda, guides, binding general rulings, and interpretation notes
referred to in this guide are the latest versions available on the SARS website, unless the
context indicates otherwise.
For more information you may –
• visit the SARS website at www.sars.gov.za;
• contact the SARS National Call Centre –
if calling locally, on 0800 00 7277; or
if calling from abroad, on +27 11 602 2093 (only between 8am and 4:30pm
South African time);
• have a virtual consultation with a SARS consultant by making an appointment via the
SARS website;
• visit your nearest SARS branch, after making an appointment via the SARS website;
or
• contact your own tax advisor or practitioner.
Comments on this guide may be e-mailed to [email protected].
Leveraged Legal Products
SOUTH AFRICAN REVENUE SERVICE
8 March 2024
Guide on the Solar Energy Tax Credit Provided under Section 6C
ii
Contents
Preface .............................................................................................................................. i
Glossary ........................................................................................................................... 1
1. Background ......................................................................................................... 1
2. Solar energy tax credit ....................................................................................... 2
2.1 The requirements of section 6C .......................................................................................... 2
2.1.1 Persons eligible for the solar energy tax credit ................................................................... 2
2.1.2 Solar photovoltaic panel requirements ................................................................................ 3
(a) Solar photovoltaic panels must be “new and unused” ........................................................ 3
(b) Generation capacity of solar photovoltaic panels ............................................................... 3
(c) Solar photovoltaic panels must be “brought into use for the first time” ............................... 3
(d) Installation requirements of the solar photovoltaic panels .................................................. 6
2.2 Allowable amount of tax credit ............................................................................................ 9
2.3 Prohibition of double deductions ....................................................................................... 10
2.4 Multiple persons incurring the cost of the solar photovoltaic panels ................................ 11
2.5 Provisional tax ................................................................................................................... 12
2.6 Disposal of solar photovoltaic panels and capital gains tax .............................................. 12
2.7 Income tax returns ............................................................................................................ 12
2.8 Recordkeeping .................................................................................................................. 13
3. Conclusion ......................................................................................................... 14
Annexure – The Law ...................................................................................................................... 15
Guide on the Solar Energy Tax Credit Provided under Section 6C
1
Glossary
In this guide, unless the context indicates otherwise -–
• “renewable energy” means energy produced from sources such as sunlight, wind,
and water, which are naturally replenished and do not run out;
1
• “Schedule” means a Schedule to the Act;
• “section” means a section of the Act;
• “solar PV panels” means solar photovoltaic panels;
• “TA Act” means the Tax Administration Act 28 of 2011;
• “tax credit” means the solar energy tax credit available under section 6C;
• “the Act” means the Income Tax Act 58 of 1962; and
• “the Regulations” means the Electrical Installation Regulations issued under
section 43 of the Occupational Health and Safety Act 85 of 1993 and published in
Government Gazette 31975 of 6 March 2009.
1. Background
The current energy crisis in the country, coupled with the rising demand for electricity, has
resulted in various tax incentives and policy measures being introduced in an attempt to
alleviate the pressure on the national grid,
2
as well as to improve energy efficiency in South
Africa.
Although the focus has generally been to promote cleaner technologies in businesses,
emphasis has shifted to also encourage the use of renewable energy technology in residential
properties, while still providing further allowances to businesses.
To this effect, two short-term incentives have been introduced, namely, a solar energy tax
credit under section 6C for natural persons, and an enhanced deduction on certain assets
used in the production of renewable energy under section 12BA for taxpayers who conduct a
trade.
3
This guide provides detail only on the tax credit under section 6C for natural persons.
4
1
www.un.org/en/climatechange/what-is-renewable-energy#:~:text=Renewable%20energy%
20is%20energy%20derived,plentiful%20and%20all%20around%20us [Accessed 8 March
2024].
2
A grid (or power grid) is a network of power lines and associated equipment used to transmit and
distribute electricity over a geographic area. See
www.collinsdictionary.com/dictionary/english/
power-grid [Accessed 8 March 2024].
3
See Taxation Laws Amendment Act 17 of 2023.
4
Consideration of the Value-Added Tax implications relating to acquiring the solar panels is beyond
the scope of this guide.
Guide on the Solar Energy Tax Credit Provided under Section 6C
2
2. Solar energy tax credit
In order to encourage households to invest in clean electricity generation capacity as soon as
possible, a tax credit has been introduced under section 6C for a limited time period.
5
Section 6C is deemed to have come into operation on 1 March 2023 and applies to years of
assessment commencing on or after this date. Furthermore, this section is only available for
a period of one year, that is, from 1 March 2023 to 29 February 2024.
This tax credit applies to natural persons who are liable for personal income tax and who invest
in qualifying solar PV panels (see 2.1.2).
Under this section, a natural person may be eligible for the tax credit on the cost that has been
actually incurred on the acquisition of qualifying solar PV panels. The cost relating to other
components of a complete solar energy system such as inverters, batteries and supporting
structures do not qualify for the tax credit.
6
The rationale behind allowing a tax credit on the
cost of only the solar PV panels is because it is the solar PV panels that promote or expand
electricity generation capacity in the country. Inverters and batteries on their own create no
additional supply of electricity and may even increase the demand on the electrical grid. While
batteries and inverters can be used on their own to provide a private benefit to a particular
household, it is the addition of solar PV panels that enhances generation supply, which
provides a public benefit.
Since the intention is to encourage natural persons to invest in renewable energy, the carrying
on of a trade is not a requirement to be eligible to claim this tax credit.
2.1 The requirements of section 6C
The tax credit under section 6C applies to the cost actually incurred by the natural person –
• for the acquisition of any new and unused solar PV panels, the generation capacity of
each being not less than 275W [section 6C(2)(a)(i)]; and
• if the solar PV panels referred to in section 6C(2)(a)(i) are brought into use for the first
time by that person on or after 1 March 2023 and before 1 March 2024
[section 6C(2)(a)(ii)].
2.1.1 Persons eligible for the solar energy tax credit
Under section 6C(1), the tax credit is available to any natural person who complies with all the
requirements of this section.
The term “natural person” is not defined in the Act. The grammatical meaning of the term, as
defined in the Merriam Webster Online Dictionary, is “a human being as distinguished from a
person (as a corporation) created by operation of law”.
7
This means that for purposes of
section 6C, a credit will not be available to any juristic persons such as companies, entities of
a similar nature or trusts. A body corporate or home-owner’s association that installs solar PV
panels in sectional title schemes or residential complexes will thus not be eligible for the tax
credit.
5
Paragraph 1.3 of the Explanatory Memorandum on the Taxation Laws Amendment Bill, 2023.
6
Section 6C(2)(a)(i) refers only to the cost of solar PV panels.
7
www.merriam-webster.com/legal/natural%20person [Accessed 8 March 2024].
Guide on the Solar Energy Tax Credit Provided under Section 6C
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2.1.2 Solar photovoltaic panel requirements
Solar PV panels are a web of photovoltaic cells or panels that captures solar power and
transforms it into sustainable energy.
8
Essentially, when the sun shines onto a solar PV panel,
energy from the sunlight is absorbed by the photovoltaic cells in the panel thus creating
electrical charges which, through an internal process, causes electricity to flow.
9
The solar PV panels usually form part of a bigger system and can include, for example,
inverters, batteries and mounting or supporting structures. However, as stated in 2, the tax
credit applies only to the cost of the solar PV panels.
In order for a natural person to qualify for the tax credit relating to the solar PV panels, certain
requirements under section 6C have to be met, namely, that –
• the panels must be new and unused;
• the generation capacity of each panel must be not less than 275W; and
• the panels must be brought into use for the first time by the natural person who
acquired it on or after 1 March 2023 and before 1 March 2024.
(a) Solar photovoltaic panels must be “new and unused”
In order to qualify for the tax credit, the solar PV panels must be new and unused. Whether
the panels are new and unused is a factual enquiry based on the facts of each case.
For purposes of this section, the panels must be both new and unused.
The solar PV panels must be new and unused when they were acquired and brought into use
by the taxpayer. Solar PV panels acquired before 1 March 2023 can qualify on the condition
that they were new and unused upon acquisition. However, in the event that the panels had,
for example, been acquired long before but had not been installed, it would be unused but not
new. No specific period can be set to the requirement of “new” and will be determined on the
facts of each case. The word “unused” means that the panels must not have been previously
used for any purpose by any person.
(b) Generation capacity of solar photovoltaic panels
In addition to the panels being new and unused, the generation capacity of each panel must
not be less than 275W. This means that the generation capacity, that is, the amount of energy
that a panel can produce, is not considered in the context of a set of panels as a whole.
Instead, each panel must be evaluated individually. If a panel produces less than 275W of
energy, a tax credit will not be applicable on the cost of this particular panel.
(c) Solar photovoltaic panels must be “brought into use for the first time”
The tax credit is available only if the solar PV panels are brought into use for the first time by
the same natural person that acquired it on or after 1 March 2023 and before 1 March 2024.
The solar PV panels, however, need not be acquired on or after 1 March 2023 to qualify for
the tax credit but still have to meet the requirements of new and unused. Boruchowitz J, in
8
www.enelgreenpower.com/learning-hub/renewable-energies/solar-energy/photovoltaic-
module [Accessed 8 March 2024].
9
www.energy.gov/eere/solar/how-does-solar-work#:~:text=When%20the%20sun%20shines
%20onto,cell%2C%20causing%20electricity%20to%20flow [Accessed 8 March 2024].
Guide on the Solar Energy Tax Credit Provided under Section 6C
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ITC 1804, explained the rationale behind the phrase “brought into use for the first time by that
taxpayer” as follows:
10
“…the allowance is available only if the asset is brought into use for the first time by the
taxpayer (or his lessee, where applicable). This requirement prevents a taxpayer from
claiming that the allowance is available for a further five, four or three years on an asset
that was previously brought into use by him (or his lessee), is retired from use and is then
brought into use again.”
The determination of when a solar PV panel can be said to have been brought into use for the
first time by the natural person is a factual one. The authors of Juta’s Tax Library correctly
state the following:
11
“The asset must be used in a way consistent with the intended and future use.”
It can thus be said that a panel is “brought into use” when it has been installed and used by a
person for its intended purpose, that is, the generation of renewable solar energy.
Paragraph 7(1) of the Regulations provides that every user or lessor of an electrical
installation
12
must be in possession of a valid certificate of compliance,
13
as well as a test
report relating to such installation. This requirement also applies to the installation of solar PV
panels. Paragraph 7(2) provides that every user or lessor of an electrical installation shall, on
request, produce the certificate of compliance for that electrical installation to an inspector, a
supplier or an approved inspection authority for electrical installations.
Paragraph 8(2) of the Regulations is peremptory and provides that no person shall connect or
permit the connection of any completed electrical installation to the electricity supply unless it
has been inspected and tested by a registered person
14
and a certificate of compliance for
that electrical installation has been issued. Under the first proviso to paragraph 8(2) of the
Regulations, the supplier
15
of electricity may, on request, connect the electric supply to the
electrical installation for the purpose of testing and for the completion of the certificate of
compliance by a registered person.
Section 6C(3) provides that a solar energy tax credit will be allowed only if, amongst other
things, an electrical certificate of compliance contemplated in the Regulations, is issued in
respect of the installation. Generally, the date on the certificate of compliance will be
considered as the date when the panels are brought into use for the first time, which must be
10
68 SATC 105 at page 109.
11
Davis, D. et al. Juta’s Tax Library [online] (Jutastat e-publications: 30 November 2017) in
Commentary on Income Tax – section 12C(1).
12
Under paragraph 1 of the Regulations, “electrical installation” means “any machinery, in or on any
premises, used for the transmission of electricity from a point of control to a point of consumption
anywhere on the premises, including any article forming part of such an electrical installation
irrespective of whether or not it is part of the electrical circuit, but excluding…”. For the full definition,
see paragraph 1 of the Regulations.
13
See 2.1.2(d) for more information on the certificate of compliance.
14
Under paragraph 1 of the Regulations, “registered person” means “a person registered in terms
of—
(a) regulation 11; or
(b) regulation 9 of the Electrical Installation Regulations, 1992,
as an electrical tester for single phase, an installation electrician or a master installation electrician,
as the case may be”.
15
Under paragraph 1 of the Regulations, “supplier” in relation to a particular electrical installation,
means “any person who supplies or contracts or agrees to supply electricity to that electrical
installation”.
Guide on the Solar Energy Tax Credit Provided under Section 6C
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on or after 1 March 2023 and before 1 March 2024 in order to qualify for the tax credit
[see 2.1.2(d)].
It may, however, happen that a certificate of compliance is issued after 29 February 2024 in
respect of solar PV panels that were installed and brought into use on or after 1 March 2023
and before 1 March 2024. In such a case satisfactory proof has to be provided that the
installation was brought into use for the first time during the said time period. Satisfactory proof
may include, for example, written confirmation from the registered person of the date on which
the solar PV panels were installed and “brought into use” for its intended purpose, that is, the
generation of renewable solar energy. Ultimately, the onus rests on the taxpayer to prove that
the solar PV panels were brought into use on or after 1 March 2023 and before 1 March 2024.
The facts of each case will be examined on its merits.
Further, the solar PV panel must be used in such a way that it in fact forms an integral part of
the photovoltaic solar energy system. A once-off use is not sufficient as this will be considered
inconsistent with the intended use of the panel. Therefore, a solar PV panel cannot be brought
into use for an isolated instance merely to take advantage of the tax credit and then be
uninstalled.
Importantly, the requirements of both sections 6C(2)(a)(i) and (ii) must be met, namely, the
solar PV panels must be new and unused, and the panels must be brought into use for the
first time by that person on or after 1 March 2023 and before 1 March 2024. Should either of
these requirements not be met, the individual will not be eligible for the tax credit.
Example 1 – The requirements “new and unused” and “brought into use for the first
time”
Facts:
Homeowner S purchased two solar PV panels in 2019 to alleviate loadshedding challenges.
These panels were immediately installed and brought into use. In 2020, S purchased three
pre-used panels from a company that was liquidating and had no more use for the panels.
Owing to the size of the battery and inverter, only two of these panels were installed.
Homeowner S upgraded the solar system in April 2023, which entailed the purchase of an
additional battery and three more panels. Of these three panels, one had a generation capacity
of 250W and the other two each had a capacity of 280W. All the panels, including the one
which was purchased but not installed in 2020, were installed and brought into use in May
2023. All the other requirements of section 6C were complied with.
Homeowner S wanted to claim the tax credit for the four panels installed and brought into use
in May 2023 against normal income.
Result:
In order to determine whether all four panels qualified for the tax credit, each panel had to be
considered independently.
The panel which was pre-used, acquired in 2020 and remained uninstalled until 2023
Under section 6C(2)(a)(i), the solar panels must be new and unused and the generation
capacity of each panel must not be less than 275W. Under section 6C(2)(a)(ii) the solar panels
must have been brought into use for the first time, by that person on or after 1 March 2023
and before 1 March 2024.
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This panel did not meet the requirements under section 6C(2)(a)(i), that is, the solar PV panel
was not new and unused since it had been acquired second-hand, thus failing the “new” test.
Even though the panel was brought into use for the first time by Homeowner S on or after
1 March 2023 and before 1 March 2024, both the requirements under sections 6(C)(2)(a)(i)
and (ii) had to have been met. Therefore, the tax credit relating to this panel could not be
claimed.
Panels which were purchased and installed in 2023
As mentioned above, section 6C(2)(a)(i) requires the solar panels must be new and unused,
and the generation capacity of each panel must not be less than 275W. These panels
complied with the requirements “new and unused” and “brought into use for the first time by
that taxpayer on or after 1 March 2023 and before 1 March 2024”. The generation capacity of
these panels had to, however, also be taken into consideration. Section 6C(2)(a)(i) requires
that each panel must not be less than 275W. Two of the panels had a generation capacity of
280W, and the other one had a generation capacity of 250W. The latter panel thus did not
meet the requirement. As such, Homeowner S could claim the tax credit relating to the two
qualifying panels.
(d) Installation requirements of the solar photovoltaic panels
In addition to the requirements under section 6C(2)(a), specific mandatory requirements are
contained in section 6C(3).
These are that –
• the solar PV panels must be installed and mounted on or affixed to a residence mainly
used for domestic purposes by the natural person referred to in section 6C(2)(a);
• the installation is connected to the distribution board of such residence; and
• an electrical certificate of compliance contemplated in the Regulations, is issued for
the installation referred to above.
Installed and mounted on or affixed to a residence
Section 6C(3)(a) requires that the solar PV panels must be installed and mounted on or affixed
to a residence. Therefore, if a taxpayer acquires solar PV panels but does not install and
mount them to a residence and does not bring them into use, no tax credit may be claimed.
The words “install”, “mounted”, and “affixed” are not defined in the Act and should, therefore,
be interpreted according to their ordinary meaning as applied to the subject matter with regard
to which they are used.
16
16
Kellaway, E. A. (1995) Principles of Legal Interpretation of Statutes, Contracts and Wills at 224.
Butterworth’s: Durban. Also, see Steyn, L. C. (1981) Die Uitleg van Wette (5 ed) at 4 to 7. Juta and
Company (Pty) Ltd.
Guide on the Solar Energy Tax Credit Provided under Section 6C
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According to the online Collins Dictionary, the words “install”, “mount”, and “affix” are defined
as follows:
“Install: 3. to fix in position for use.
17
Mount: 4. to fix onto a backing, setting, or support.
18
Affix: 1. To attach, fasten, join, or stick.”
19
The coordinating conjunction “and” is used between the words “installed” and “mounted on or
affixed to”, which means that the solar PV panels must be installed and mounted on or affixed
to the residence mainly used for domestic purposes. The legislation does not prescribe the
exact place where the solar PV panels must be mounted on or affixed to the residence. Owing
to various technical reasons it may not be possible or feasible to mount or affix the solar PV
panels to the residential building itself, but rather, for example, to an outbuilding or
independent supporting structure. In considering whether the requirement of “mounted on or
affixed to” the residence has been met, regard has to be had to the purpose of section 6C,
namely, that the rebate should benefit natural persons at their private residences, rather than
a literal interpretation of the words.
20
The facts of each case must be considered.
Many solar PV panel systems will be of a permanent nature, since they are wired into the
electrical system of the premises and become integrated into the permanent structure.
21
As
such, the panels must be mounted on or affixed to the residence in such a way that there is a
certain degree of permanency that would ensure the effective and sustained use of the solar
PV panels. This will be a factual consideration.
Under the common law principle of superficies solo cedit (owned by accession), moveable
property becomes immovable when affixed or attached to the land. Whether an asset has
been affixed or attached to the land to become immovable, three factors are relevant,
namely –
• the nature of the asset;
• the manner of its annexation; and
• the intention of the person affixing the asset.
The first two factors are determined objectively, while the third test is subjective. The
assessment of these criteria is dependent on the facts of each case. The requirement under
section 6C that the solar PV panels must be installed and mounted to a residence does not
mean that the panels must be attached in such a way that the principles of accession must be
met. The terms “installed” and “mounted” suggest that generally acceptable industry norms
and standards for installation of the solar PV panels must be met. This is a factual
determination.
17
www.collinsdictionary.com/dictionary/english/install [Accessed 8 March 2024].
18
www.collinsdictionary.com/dictionary/english/mount [Accessed 8 March 2024].
19
www.collinsdictionary.com/dictionary/english/affix [Accessed 8 March 2024].
20
In Capitec Bank Holdings Ltd and another v Coral Lagoon Investments 194 (Pty) Ltd and others
[2021] 3 All SA 647 (SCA) the principle of interpretation was confirmed that it is the language used,
understood in the context in which it is used, and having regard to the purpose of the provision that
constitutes the unitary exercise of interpretation.
21
See Interpretation Note 47 “Wear-and-Tear or Depreciation Allowance” for further detail on the
meaning of “permanent nature”.
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Section 6C does not require the natural person wanting to claim the tax credit to be the owner
of the residence where the solar PV panels are installed and mounted. This means that a
lessee or any natural person who occupies a residence for domestic purposes and who has
acquired and actually incurred the costs of the solar PV panels may be eligible for the tax
credit.
22
In the event that a lessee of a residence who actually incurred the costs of the solar
PV panels moves out of the residence on which such panels are installed and mounted on or
affixed to, the owner of the house or the new lessee will not be able to qualify for the tax credit
on the cost of the same panels since the owner or new lessee has not acquired the solar PV
panels, has not actually incurred the cost, nor were they new and brought into use for the first
time.
If the residence is registered in the name of a juristic person or trust, the registered owner will
not be eligible for the tax credit. A body corporate or home-owner’s association that installs
solar PV panels on the common property in sectional title schemes or residential complexes
will also not be eligible for the tax credit. A natural person occupying such residence may,
however, qualify for the tax credit if that natural person has actually incurred the cost of the
solar PV panels and subject to meeting the other requirements under section 6C.
If the owner of solar PV panels uninstalls the panels from a residence and reinstalls them at
another residence, this person will not be eligible to claim the tax credit again since the
requirements of new and unused will not be met.
Residence mainly used for domestic purposes
Under section 6C(3)(a), the residence where the panels are installed and mounted on or
affixed to must be used mainly for domestic residential purposes by the natural person that
acquired the solar PV panels. The person who incurs the acquisition cost of the panels must
also reside in the residence on which the panels are mounted on or affixed to. A natural person
can therefore not install panels on someone else’s residence and claim the tax credit on the
cost incurred for acquiring those panels. A natural person who owns a residence but does not
reside in it, for example, the residence is let to someone else, will also not be eligible to claim
the tax credit.
The determination of whether a residence is mainly used for domestic residential purposes is
a question of fact.
In Glen Anil Development Corporation Ltd v SIR Botha JA stated the following:
26
“Section 103(2) uses the words ‘solely or mainly for the purpose . . . ’ In the Oxford English
Dictionary ‘mainly’ is defined to mean ‘for the most part; in the main; as the chief thing,
chiefly, principally’. The word ‘hoofsaaklik’ is used in the Afrikaans text. … the onus was on
the appellant to show that the transactions in question were not entered into solely or mainly
for the purpose of utilizing the assessed loss or balance of assessed loss … That onus
would be discharged if the appellant satisfied the court that the avoidance … was not a
more important consideration in the mind of Dr Rubenstein (acting on the advice of his
auditors) than the avoidance of estate duty and undistributed profits tax.”
In SBI v Lourens Erasmus (Edms) Bpk
27
Botha JA held that, in the context of an exemption
for the previously applicable undistributed profits tax, the word “mainly” prescribed a purely
quantitative standard of more than 50%.
22
Explanatory Memorandum on the Taxation Laws Amendment Bill, 2023.
Guide on the Solar Energy Tax Credit Provided under Section 6C
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In order for a natural person to qualify for the tax credit, the residence on which the solar PV
panels are installed and mounted on or affixed to, must be used more than 50% for domestic
purposes during the year of assessment. If the residence is used for dual purposes, for
example, as a domestic residence and a portion for purposes of trade, a determination will
have to be made in relation to whether the more than 50% requirement has been met. In
practice, if more than 50% of a residence, measured by floor space or volume, is used during
the year of assessment for residential purposes, the “mainly” requirement will be met. If, for
example, the taxpayer uses 60% of the residence for residential purposes, the full tax credit
under section 6C may be claimed, that is, no apportionment is necessary. On the other hand,
if a taxpayer uses 50% or less of the residence for domestic purposes, no tax credit may be
claimed.
Connection to the distribution board
Under section 6C(3)(b), the natural person must ensure that the solar energy system is
connected to the distribution board of the residence. A distribution board is where the electrical
supply is distributed from within the building. The main supply cable comes into the board and
is then distributed to the breakers and from there to all the circuits, for example, the lights and
plugs, amongst other things.
Electrical certificate of compliance
Section 6C(3)(c) makes it a mandatory requirement that the natural person must acquire an
electrical certificate of compliance contemplated in the Regulations and issued for the
installation of the solar PV panels. The electrical certificate of compliance should be issued in
the 2024 year of assessment for this requirement to be met. See 2.1.2(c)
for detail on
instances when a certificate of compliance is issued after the 2024 year of assessment.
An electrical certificate of compliance is a legal document that verifies an electrical installation
is compliant with all the legal requirements as stipulated in the Electrical Installations
Occupational Health and Safety Act of South Africa on the date of inspection.
23
This document is usually issued to the owner of the residence (see 2.4 for a discussion of
multiple persons incurring the cost of the solar PV panels). If solar PV panels are installed and
mounted on or affixed to a leased property, it would be sufficient for the person wanting to
claim the tax credit to provide, as supporting documentation, the certificate as well as the
rental contract indicating the names of the parties to the lease agreement.
In the absence of this certificate, a tax credit will not be available to the natural person. The
taxpayer does not need to submit this certificate to SARS, but should retain it for audit
purposes for a period of five years according to the recordkeeping requirements under
section 29 of the TA Act.
2.2 Allowable amount of tax credit
The tax credit is claimed when the natural person’s normal tax payable is determined. The
normal tax payable can be from any source of income, including salary income. The term
“normal tax” is defined in section 1(1) and means –
“income tax referred to in section 5 (1)”
23
https://electrical-compliance-certificate.co.za/certificate-of-compliance/what-is-an-
electrical-certificate-of-compliance/ [Accessed 8 March 2024].
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10
Section 5(1)(d) states that income tax (or normal tax) must be paid annually on the taxable
income received by or accrued to or in favour of any person (other than a company) during
the year of assessment ending during the period of 12 months ending on the last day of
February each year.
The amount of the tax credit allowed as a rebate to an individual under section 6C(2)(b) is
25% of the cost actually incurred on the solar PV panels, up to a maximum of R15 000. The
tax credit is deducted from the natural person’s tax liability.
The tax credit is limited to the actual cost of the solar PV panels and excludes other costs such
as supporting structures, installation costs or financing costs.
Example 2 – Allowable amount of solar energy tax credit
Facts:
Q, a natural person and homeowner, invested in the installation of a solar energy system
consisting of 20 solar PV panels, which were all new and unused and had a generation
capacity of 330W each. Owing to certain technical reasons, the panels could not be affixed to
the roof of Q’s residence. The solar PV panels were mounted onto a supporting structure that
was adjacent to Q’s residence. All the solar PV panels were used for domestic purposes. This
installation took place on 20 August 2023.
The cost of the panels (excluding installation and the other components of the solar energy
system) was R70 000, that is, R3 500 per panel. All the solar PV panels met the requirements
of section 6C(3), since all 20 panels were considered as being mounted on or affixed to a
residence to be used mainly for domestic purposes. Before taking into account the tax credit,
Q had a tax liability of R25 000 for the 2024 year of assessment.
All of the requirements under section 6C were met.
Result:
Since all the requirements of the section were complied with, Q was eligible for the tax credit
on the cost of the solar PV panels at 25%, but up to a maximum of R15 000.
The tax credit was calculated as follows: R70 000 × 25% = R17 500 limited to R15 000. Since
Q could not claim more than R15 000 as the tax credit, Q’s normal tax liability of R25 000 was
reduced by R15 000 resulting in normal tax payable of R10 000 for the 2024 year of
assessment. The remaining R2 500 (R17 500 – R15 000) was forfeited and could not be
carried forward to a subsequent year of assessment.
2.3 Prohibition of double deductions
Under section 6C(4), a deduction is prohibited on the cost of any asset on which a deduction
has been allowed to the taxpayer under section 12B or 12BA.
24
This ensures that there is no
duplication of tax incentives for the cost of a solar PV panel.
24
Sections 12B and 12BA provide for capital allowances on certain assets that are used for purposes
of trade and in the generation of electricity from listed renewable sources.
Guide on the Solar Energy Tax Credit Provided under Section 6C
11
2.4 Multiple persons incurring the cost of the solar photovoltaic panels
It may occur that more than one natural person as co-owner actually incurs the cost of the
solar PV panels. In these cases, provided that all the requirements of the section are met,
each person will be able to claim the tax credit at the rate of 25% on their portion of the cost.
In other words, each party will thus not be eligible for a credit amounting to 25% of the full
cost of the panels.
The electrical certificate of compliance [see 2.1.2(d)] is issued for the installation of the solar
PV panels to a specific residence. If more than one person has incurred the cost to acquire
the solar PV panels, the same electrical certificate of compliance can be used by all the
qualifying persons to claim the tax credit provided that all the other requirements have been
met.
25
Example 3 – Multiple persons incurring the cost of the solar PV panels
Facts:
X and Y jointly invested in the installation of a solar energy system. X and Y both use the
residence mainly for domestic purposes. This installation took place on 1 July 2023 and
included the purchase of 20 solar PV panels that were all new and unused and had a
generation capacity of 550W each.
The cost of the panels (excluding installation and the other components of the solar energy
system) was R84 000, that is, R4 200 per panel.
X bore 80% of the cost of the panels and Y bore the remaining 20%.
All of the requirements under section 6C were met.
Result:
Since all the requirements of the section were complied with, X and Y were eligible for the tax
credit on the actual cost of the panels at 25%, but up to a maximum of R15 000 each.
X’s portion of the costs amounted to R67 200 (R84 000 × 80%). The solar energy tax credit
applicable to X was R16 800 (R67 200 × 25%). This amount was, however, limited to R15 000.
As such, X is eligible for a tax credit of R15 000 and the remaining R1 800 (R16 800 –
R15 000) was forfeited.
Y’s portion of the costs amounted to R16 800 (R84 000 × 20%). The tax credit applicable to Y
was R4 200 (R16 800 × 25%). This amount is below the limit of R15 000. Consequently, Y is
eligible for the tax credit of R4 200.
25
Section 6C(3)(c) requires that an electrical certificate of compliance is issued in respect of the
installation.
Guide on the Solar Energy Tax Credit Provided under Section 6C
12
2.5 Provisional tax
Under paragraph 17 of the Fourth Schedule, all provisional taxpayers must make provisional
tax payments to the Commissioner in respect of their liability for normal tax for every year of
assessment. The term “provisional taxpayer”, as defined in paragraph 1 of the Fourth
Schedule, includes natural and juristic persons.
Provisional taxpayers who are natural persons will be able to claim the section 6C tax credit
against the final provisional tax liability subject to the maximum of R15 000.
26
2.6 Disposal of solar photovoltaic panels and capital gains tax
A taxpayer who subsequently disposes of solar PV panels on which the tax credit was claimed,
has no recoupment of the tax credit. The purchaser of these solar PV panels will, however,
not be eligible to claim the tax credit under section 6C since that purchaser will not meet the
requirements (see 2.1).
The disposal of the solar PV panels may be subject to capital gains tax.
27
If the solar PV panels are fixed to the residence in such a way that the common law principle
of accession is met, the installation of the solar PV panels may be regarded as an improvement
to the residence upon which the panels are mounted on or affixed to. As such, upon the sale
of the residence, the Eighth Schedule must be taken into account for any capital gains or
losses upon the disposal of such asset. In the event that the solar PV panels are regarded as
a movable asset, any gain or loss will be disregarded entirely under paragraph 53 as a
personal-use asset.
The facts of each case must be evaluated when determining any capital gains tax implications.
2.7 Income tax returns
The Commissioner annually gives public notice in the Government Gazette of the persons that
must furnish an income tax return.
28
A return must be a full and true return
29
and be signed by the taxpayer or by the taxpayer’s
duly authorised representative. The person signing the return will be regarded as being
knowledgeable of the statements made in the return.
30
A natural person claiming the tax credit under section 6C may have to confirm the following
information in the tax return:
• The number of new and unused solar PV panels installed
• That the panels are connected to the residence’s electrical distribution board
• That the minimum generation capacity is 275W for each solar PV panel
26
See GEN-PT-01-G01-Guide for Provisional Tax External Guide for more information on provisional
tax.
27
See the Comprehensive Guide to Capital Gains Tax for more information on capital gains tax.
28
Section 66(1).
29
Section 25(2) of the TA Act. Under section 234(1) a person that wilfully submits a false statement
in a return is guilty of a criminal offence and liable, on conviction, to a fine or imprisonment for a
period not exceeding two years.
30
Section 25(3) of the TA Act.
Guide on the Solar Energy Tax Credit Provided under Section 6C
13
• That a legitimate electrical certificate of compliance has been issued
2.8 Recordkeeping
Taxpayers are required to keep records for five years
31
from the date of the submission of a
return under the TA Act.
32
A return
33
includes any form, declaration, document or other manner of submitting information
to SARS that incorporates a self-assessment or is the basis on which an assessment is to be
made by SARS.
Although records are generally required to be kept and retained for five years, there are
circumstances in which they are required to be retained for longer periods.
34
The required retention periods for records, books of account or documents are as follows:
35
• Five years from the date of the submission of a return.
36
• If no return is submitted for a tax period but is required to be submitted, records, books
of account or documents must be kept and retained indefinitely until the obligation to
submit a return has been complied with, and then for five years from the date of
submission of the return.
37
• If an objection or appeal against an assessment or decision is lodged, the records,
books of account or documents relevant to the objection or appeal must be kept and
retained until the disputed assessment or decision becomes final or the applicable five-
year period has elapsed, whichever is the later.
38
• A person notified of, or who is aware of an audit or investigation
39
by SARS, must retain
the records, books of account or documents relevant to that audit or investigation until
it is concluded or the applicable five-year period has elapsed, whichever is the later.
40
A natural person wanting to claim the tax credit under section 6C will have to retain, amongst
other things, the following records:
• An electrical certificate of compliance contemplated in the Regulations issued for the
specific installation. Such a certificate must, amongst other things, contain a certificate
number, the registration number and contact details of the electrical contractor who
completed the installation and certification.
31
Section 29(3) of the TA Act.
32
Sections 3 and 4 of the Tax Administration Laws Amendment Act 44 of 2014 amended and repealed
sections 18A(4) and 30(9), respectively. These amendments came into operation on 20 January
2015.
33
The term “return” is defined in section 1 of the TA Act.
34
Section 32 of the TA Act.
35
For further commentary, see the SARS Short Guide to the Tax Administration Act, 2011 (Act No. 28
of 2011).
36
Section 29(2)(a) read with section 29(3)(a) of the TA Act.
37
Section 29(2)(b) of the TA Act.
38
Section 32(b) of the TA Act.
39
For further commentary on inspections, verifications, audits and criminal investigations, see the
SARS Short Guide to the Tax Administration Act, 2011 (Act No. 28 of 2011).
40
Section 32(a) of the TA Act.
Guide on the Solar Energy Tax Credit Provided under Section 6C
14
• An invoice for the purchase of the solar PV panels. The invoice should reflect, amongst
other things, the number of panels purchased, the cost per solar PV panel, and the
wattage of each panel.
• Proof of the date of installation of the panels and the date when they were brought into
use.
• Proof that the installation is for a residence mainly used for domestic purposes by the
natural person who acquired the solar PV panels.
The above records as well as other relevant information may be requested by SARS for
purposes of the administration of section 6C.
41
3. Conclusion
The tax credit under section 6C is available for a limited period. The aim of this incentive is to
encourage and promote renewable energy in households thereby reducing the pressure on
the national electricity grid.
Section 6C applies only to natural persons meeting the strict requirements and for the years
of assessment commencing on 1 March 2023 and ending on 29 February 2024. Thus, the
allowance will be available only for one year.
41
Under section 46 of the TA Act relevant material may be requested.
Guide on the Solar Energy Tax Credit Provided under Section 6C
15
Annexure – The Law
Section 6C
6C. Solar energy tax credit.—(1) In determining the normal tax payable by any natural person, there
must, subject to subsection 4, be deducted an amount to be known as the solar energy tax credit, equal to
the amount of the rebate determined under subsection (2).
(2)(a) The solar energy tax credit applies in respect of the cost actually incurred by the natural
person—
(i) for the acquisition of any new and unused solar photovoltaic panels, the
generation capacity of each being not less than 275W; and
(ii) if the solar photovoltaic panels referred to in subparagraph (i) are brought into
use for the first time, by that person on or after 1 March 2023 and before 1 March
2024.
(b) The amount of the solar energy tax credit allowed to the natural person referred to in
paragraph (a) must—
(i) be 25 per cent of the actual cost of the solar photovoltaic panels described in
paragraph (a); and
(ii) in aggregate be limited to an amount not exceeding R15 000.
(3) A solar energy tax credit will be allowed under subsection (1) only if —
(a) the solar panels are installed and mounted on or affixed to a residence mainly used for
domestic purposes by the natural person referred to in subsection (2)(a);
(b) the installation is connected to the distribution board of such residence; and
(c) an electrical certificate of compliance contemplated in the Electrical Installation
Regulations, 2009, is issued in respect of the installation referred to in paragraph (a).
(4) No deduction shall be allowed under this section in respect of any asset in respect of which
a deduction has been allowed to the taxpayer under section 12B or 12BA.