Tax and SARS knowledge base
Tax allowance for solar or renewable-energy equipment
What tax allowance is available when a company buys solar or renewable-energy equipment?
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Direct answer
A company buying solar or renewable-energy equipment may need to assess sections 12B, 12BA or 12U, depending on the asset and facts. SARS's renewable-energy guide addresses those provisions and says the specified sources include solar energy. The result depends on the current provision, asset type, expenditure, ownership, date, use and supporting evidence. Do not rely on a supplier's broad statement that the system is tax deductible.
Start with the asset facts. Identify each component, who owns it, when it was paid for, when it was brought into use and how it is used in the business. Then apply the current rules to that evidence.
What this means in practice
A solar project is rarely one invoice and one asset. A proposal may include panels, inverters, batteries, mounting, electrical upgrades, monitoring systems, installation, finance costs, maintenance and other work. The commercial package may be sensible, but its pieces can need different tax treatment.
Build a technical and financial asset file from the outset. Keep the quotation, final invoice, bill of quantities, serial numbers, installation contract, commissioning certificate, payment proof and fixed-asset register. Record the exact date on which the equipment was first available for business use, not simply the date a deposit was paid.
Ownership matters. A company that buys equipment, leases it, rents power, uses equipment owned by a landlord or shares a system with another party may not have the same tax position. Private or mixed use can also be relevant, especially where a home office, residence or mixed-use property is involved.
Step-by-step
- Separate the project components.
Ask the supplier for an itemised quotation and final invoice. Record equipment, installation, electrical work, civil work, finance, maintenance and professional fees separately. This reduces the risk of applying one tax label to an entire project without analysis.
- Confirm the owner and user.
Keep the purchase agreement, finance agreement, lease if any, title or landlord consent, and company resolution. Record whether the company owns, rents or merely uses the system and whether the premises are business-only or mixed use.
- Capture the placed-in-use evidence.
Keep delivery records, installer sign-off, commissioning certificate, connection documentation and the date the system first generated or supported business activity. A payment date or order date may not be the relevant operational date.
- Add the asset to a detailed register.
Include cost, location, serial numbers, component description, supplier, asset class, date brought into use and expected business use. Link the schedule to the general ledger and the tax computation.
- Apply the current allowance or incentive rules.
Check current SARS tax-incentive material, legislation and professional advice. Confirm applicable dates, conditions, exclusions, percentage or allowance rules and the treatment of any components that are not qualifying equipment.
- Maintain the file after installation.
Update it for additions, replacements, insurance proceeds, sale, scrapping, relocation and changes in use. These later events can affect the tax position and must not be hidden in maintenance expense accounts.
Documents and records to keep
Keep the proposal, itemised quotation, contract, purchase order, supplier tax invoice, payment proof, finance or lease agreement, commissioning documentation, technical specifications, serial numbers, insurance schedule and fixed-asset register. Retain utility data or monitoring reports where they help show the system's operational use.
Keep the tax calculation and a note explaining which current provision was applied. If the project includes a grant or rebate, preserve that agreement separately because it may affect the tax analysis.
Important limits and exceptions
This guide does not provide a fixed solar deduction rate, period or expiry date. Incentives and allowances can change, and equipment can be subject to detailed conditions. A business should not claim an amount before confirming the current law and the exact system facts.
Do not assume all installation, finance, maintenance, repairs or building work follows the same allowance. Leasing, private use, residential use, shared ownership, second-hand equipment and later disposal can require a different result.
When to get tailored advice
Get tailored advice before filing where the project is large, funded, leased, installed on mixed-use premises, connected with an incentive or grant, or includes batteries and major building work. Obtain help if invoices are not itemised or ownership is unclear.
TaxProof can help build the asset evidence file and reconcile it to the company records. We cannot determine an allowance or incentive claim without the current rules and complete project documentation.