Fuel Savings Capitalization – Section 12L Tax Incentive

Allow Your Supply Chain to Capitalize on Fuel Savings by Benefiting from the Section 12L Tax Incentive

With rising fuel prices, companies are looking into their supply chains to cut cost and improve competitiveness. More specifically, companies are asking themselves whether they can make operational changes to improve the fuel efficiency of their fleet or how best they can use new technology to reduce their fleet’s fuel consumption.

However, what some of these companies may not realize is that, in addition to the cost benefit of saving fuel, they can access a tax incentive for fuel savings for a period of twelve months from a specific fuel efficiency intervention. Section 12L of the Income Tax Act No 58 of 1962 (section 12L) offers taxpayers a tax deduction of 95 cents per kilowatt hour saved. The tax saving is then calculated as the 95 cents per kilowatt hour multiplied by the ruling corporate tax rate.

Section 12L can be claimed for savings of any form of energy, including fuels commonly used in logistics such as diesel, jet fuel, and petrol. To put the benefit from section 12L into perspective –

The added benefit of section 12L, at about 20% of the fuel price, is not something you want to leave on the table.

Given that the benefit is substantial, what type of projects qualify? Improvements in fuel efficiency are often realised by implementing new technology or by making operational changes to reduce fuel consumption. Some examples include –

  • Replacing vehicles in the fleet with more fuel-efficient vehicles;
  • Installing fleet management software to optimise operations;
  • Allocating the most suitable vehicles to specific tasks;
  • Optimising vehicle capacity (i.e. load management) and route (i.e. route optimisation);
  • Reducing vehicle idling; and
  • Improving driver behaviour through training and incentivisation.

It is also important to remember that section 12L can also be claimed retrospectively for fuel savings realised from interventions already implemented. Taxpayers that have already implemented fuel efficiency initiatives but have not yet claimed section 12L on the fuel savings, should consider doing so.

It you have implemented or are planning to implement any fuel efficiency initiatives, don’t leave the benefit of section 12L on the table. Contact us. One of the Catalyst Solutions entities is a SANAS-accredited measurement and verification body for energy efficiency that has successfully assisted our clients to access section 12L for several fuel efficiency initiatives.



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