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The South African Revenue Service (SARS) has issued an interpretation note on the deduction provided for energy-efficiency savings in Section 12L of the Income Tax Act.
As a complementary measure to the prospective carbon tax policy, the Government has introduced other environment-related tax incentives to address concerns related to global warming and energy security.
In that regard, in an effort to encourage taxpayers to convert old technologies to newer, more energy-efficient technologies which may involve substantial amounts of capital, Section 12L allows taxpayers to claim a deduction for most forms of energy savings that result from activities performed in the carrying on of any trade and in the production of income.
From November 1, 2013, to February 28, 2015, the rate at which the deduction was calculated was ZAR0.45 (USD0.03) per kilowatt hour or kilowatt hour equivalent of energy-efficiency savings. For years of assessment commencing on or after March 1, 2015, the deduction is calculated at ZAR0.95.
Section 12L became effective on November 1, 2013, and currently applies until years of assessment ending before January 1, 2020.
It is a requirement that a certificate must be obtained from the South African National Energy Development Institute for the energy-efficiency savings generated for the year of assessment. The energy-efficiency certificate does not have to be submitted to SARS but must be retained for audit purposes for a period of five years. Certificates cannot be traded.
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