New Energy Efficiency Tax Incentive

The Minister of Finance Pravin Gordhan has announced in the Government Gazette No. 855 that the long awaited section 12L energy efficiency tax incentive came into operation effective from 1 November 2013.

The incentive provides for an income tax deduction equal to 45c per kilowatt hour or kilowatt hour equivalent of energy efficiency savings achieved by the taxpayer during the year of assessment measured against a baseline period.

There are certain requirements and steps which have to put in place by entities who would like to access this tax incentive.

  • The entity will have to register with South African National Energy Development Institute (“SANEDI”).
  • The entity will have to appoint a Certified Measurement and Verification Professional (“CMVP”) who will then compile a report on energy efficiency saving of the company to be submitted to SANEDI.
  • SANEDI will then issue a report to the entity stipulating the energy efficiency savings which then needs to be submitted to SARS with the entity’s tax return.