A detailed analysis of energy tax incentives in South Africa

Abstract

Coupled with the issue of promoting energy efficiency in South Africa is the need to focus on the source of energy production. The country's excessive burning of coal resources has been linked to the global warming crisis. To address this energy crisis, taxpayers can be encouraged to play an important role in moving the country towards a position of energy stability by conserving energy or decreasing their energy consumption, or contributing towards the research and development of energy-efficient processes as well as cleaner forms of energy. This study analyses the energy-related tax incentives that are currently legislated and available to South African taxpayers and discusses the feasibility of taking advantage of these incentives. The study may provide guidance to taxpayers that have decided to invest in renewable energy sources and will discuss some of the advantages and perceived challenges facing the renewable energy industry. This study also provides a worked example that illustrates a detailed calculation of the energy tax saving incentive set out in section 12L of the Income Tax Act, No. 58 of 1962. A case study guides taxpayers though the practical process of applying for and calculating their energy-saving tax deduction. The case study may be used as a point of reference for taxpayers planning to implement the section 12L energy efficiency tax incentive for the first time and may highlight complexities and concerns they should consider.