- SARS has identified the rapidly growing renewable energy subsector as a significant source of revenue and aims to ensure maximum tax compliance from this emerging industry.
- Ongoing load shedding issues in South Africa have prompted businesses, households, and provincial governments to increasingly turn to alternative power supplies, including solar and wind energy.
- The South African government has introduced incentives, such as tax rebates and the Energy Bounce Back Scheme, to further encourage the adoption of renewable energy sources.
The South African Revenue Service (SARS) has identified the rapidly growing renewable energy subsector as a significant source of revenue, aiming to ensure maximum tax compliance from this emerging industry. With the country facing ongoing load shedding issues, businesses, households, and even provincial governments are increasingly turning to alternative power supplies to supplement or completely replace their energy needs.
SARS Commissioner Edward Kieswetter shared the agency’s findings on the remarkable growth in renewable energy during a recent discussion on revenue outcomes. According to Kieswetter, SARS has observed triple-digit percentage increases in import values year-on-year, prompting the tax authority to focus its attention on servicing this emerging subsector.
In the Western Cape, for instance, several wind energy-linked entities have transitioned from a refund position to a VAT-paying position as their projects come online. “For the 2022/23 financial year, collections from wind farms in the Western Cape across all tax types increased by 26.6% to R2.7 billion,” Kieswetter noted.
SARS has also reported a ‘drastic increase’ in solar panel imports, with the top ten importers experiencing a 73% growth in import value year-on-year, totaling R3.8 billion in 2022. Other notable import increases include static converters, with the top ten importers witnessing a 609% growth in value year-on-year, amounting to R5.1 billion in 2022, and lithium-ion batteries, where the top ten importers experienced a 240% import growth year-on-year, totaling R7.8 billion in 2022.
The rapid growth in renewable energy can be partly attributed to the government’s efforts to incentivize the purchase of alternative power supplies. As announced in the finance minister’s latest budget speech, businesses can reduce their taxable income by 125% of the cost of an investment in renewables starting 1 March 2023. Additionally, individuals installing rooftop solar panels can claim a rebate of 25% of the cost of the panels, up to a maximum of R15,000.
These rebates, available for the 2023/24 tax year, are expected to further drive the shift towards renewable energy sources. In April, the National Treasury also launched the Energy Bounce Back Scheme, guaranteeing solar-related loans for small and medium enterprises on a 20% first-loss basis.
Load shedding has been at record high levels this year, surpassing the frequency of 2022. In comparison, during a period with slightly lower levels of load shedding last year, solar provider Solana Energy reported that R2.2 billion worth of solar photovoltaic (PV) panels were purchased in the first five months of the year.
As South Africa continues to grapple with load shedding and energy challenges, SARS is poised to capitalize on the emerging renewable energy subsector and its exponential growth, ensuring maximum tax compliance and revenue generation from this thriving industry.