Count Down to submission for 2023 / 2024 Tax Year Feb 28 2024
With the right incentives being made available to taxpayers, South Africa could become a leader in the production of renewable energy.
South Africa has an abundance of natural resources that support the generation of renewable energy, including some of the world’s best wind and solar conditions. With the implementation of incentives to encourage taxpayers to participate in the production of renewable energy, South Africa could become a major producer of renewable energy.
There seems to be no light at the end of the proverbial tunnel when it comes to the inconvenience and impact on economic activity that Eskom load shedding is having.
However, Section 12B of the Tax Act plays an integral part in National Treasury’s efforts to encourage investment into cleaner energy forms, broaden available energy sources and reduce greenhouse gas emissions.
Are you a South African Tax Payer and would you like to create tax credits from an investment in renewable energy?
Impact Energy Solutions (IES) a division of Impact Investment Group has revolutionised the landscape for both investing in and creating access to solar and other renewable energy sources in South Africa, leveraging Section 12(B) of the Income Tax Act to allow taxpayers to invest in solar energy and create tax credits for themselves.
REGISTER YOUR INTEREST
Frequently Asked Questions (FAQ's)
Do you have a question?
We are here to try and answer any potential questions you may have. Please have a look through the questions and answers below to see if your query is covered.
If you don’t see your question listed here, then please send us your question either by email to info@impactenergy.africa or complete the form at the bottom of the page.
You can find Section 12B of the Income Tax Act No. 58 of 1962 through the following SARS link:
- Individuals
- Trusts
- Companies
IES Impact Energy Solutions (IES) is the registered business entity that will operate the investment structure.
It will facilitate the supply of electricity through solar, wind, hydrogen or hydropower projects.
The structure works by establishing a partnership. IES will act as the general partner, to manage your investment through a limited partnership, on behalf of all limited participating partners, and will carry unlimited liability for the partnership.
As the general partner, IES holds unlimited liability.
The company is Impact Energy Solutions (IES). It undertakes to partner with several suitable qualified installers around the country to provide solar power.
The limited partnership structure enables each partner to be protected from any external liabilities that might arise from conducting a business.
You invest with IES through our specialised limited partnership structure. We will assist you to complete all the necessary documentation, which you would then submit to SARS with your tax return. Your investment generates a tax credit once your tax return is processed, and this is paid out to you once SARS has completed its assessment.
You invest with IES through our specialised limited partnership structure. We will assist you to complete all the necessary documentation and then you can deduct your investment from your taxable earnings for the period in question when submitting your return.
These would invest with IES in the same way as individuals. IES has a separate, but similar, partnership agreement structure for companies and trusts.
The minimum loan repayment is R100 000, which would translate into a minimum loan amount of around R300 000. IES has the discretion to allow small variations around these parameters.
Yes. We do encourage investors to look at this opportunity, as it is likely to offer far greater returns than the money market, or any other investments that you may be involved in.
No. The only time that SARS would not refund the tax credit portion of your investment is if it can be shown that a project was not fully implemented and used for trade by the end of the relevant tax year.
IES undertakes to ensure that all selected projects are compliant with SARS rulings. You must be tax compliant to benefit from Section 12B.
You are agreeing to participate in a business that supplies and sells electricity and alternative energy-generating equipment. The main benefits of the business to its customers are to:
- supply security (relief from load-shedding) and
- price security (relief from Eskom price hikes).
You are required to pay an initiation fee of 10% of your estimated SARS tax refund (this is calculated at 10% of 35% of the total loan value).
This is capped at a maximum of R25 000, for individuals and is essentially an advance payment of the 35% loan repayment that we require.The initiation fee is then deducted from your 35% loan repayment. It can be funded by the tax credit of your partnership participating interest.
The loan amount is up to you. Your loan can be matched with your net annual taxable income (after all deductions) and you will be liable to repay 35% of the loan amount by the 31st of December 2023. Your tax credit should fund most of the 35% required repayment.
The partnership business will be able to meet the outstanding loan balance, and no further contributions from you will be required.
This calculation is based on your annual net taxable earnings, after all deductions.
The income and cash flow from the partnership business will service and repay the balance of the loan. Its (whose?) primary income will be derived from customers who sign rental agreements for the supply of electricity.
Your liability is limited to the investment you make, which will be financed mainly through your refunded tax credit from SARS.
No. You carry no liability for any other investor because IES is the general partner and carries unlimited liability for the overall project.
The En Commodite (Limited) Partnership is a partnership agreement and structure that limits the partner’s liability in a way similar to a (PTY) LTD entity.
- Commitment to Participate
- En Commodite (Limited) Partnership Agreement
- Loan & Cession Agreement
- Deed of Adherence
- You will also be required to supply your FICA documents
You will need to come on board as an investor and have your paperwork underway and your deposit paid by the 10th of February 2023, to qualify for the Financial Year End 2022 / 2023 (the 28th of February 2023).
All submissions need to be completed in full before the 28th of February 2023 and each will also need to be allocated to a suitable compliant project.
Should you only be able to submit your documents to us after the 10th of February, your participation will have to be handled on a case-by-case basis – as we cannot promise that you can be matched with a compliant project. If there are initially no compliant projects that can be matched with your commitment to participate in the partnership, your application will not be rejected but can be allocated to the 2023 / 2024 tax year.
This will be handled on a case-by-case basis – and preference will be given to those participants that comply in full with the application process if there are limited places available. Payment terms may be negotiated for a maximum period of 5 months.
If you submit your annual tax return timeously, you should receive your refund from SARS between August and October. The contractual agreement with IES states that you must ensure your payment is received by IES before 31 December 2023. The acceptance of late payments will be at the discretion of IES, and a decision will be guided by the impact of a delay on the whole partnership.
The deadline is 31st December 2023.
Section 12B provides for a capital allowance for movable assets owned by a taxpayer and used in the production of renewable energy to be deducted on a 50|30|20 basis over three years. These assets have to be brought into use for a taxpayer’s trade (in this case IES will meet this requirement, as it is in the business of generating power). The minimum implementation period is, therefore, three years.
The Partnership will exist for a total of twenty (20) years from inception.
You will be eligible for both the Financial Report of the Partnership and Disbursements from the end of Year One.
The first obligation of the partnership will be to service the outstanding loan balances with the balance of profits distributed to partners according to their partnership interests.
In the absence of any instructions to IES, your partnership interest will be terminated on your death and the value of your partnership will be paid into your estate. However, your partnership interest can be passed on to your heirs according to the provisions of your will. IES has discretion in this regard and will consider the overall interest of the remaining partners.
No. You can elect to invest in each financial year and you will receive a tax benefit each time.
Not as such. Your tax credit is invested into a limited partnership which will own and operate solar projects. You may elect to receive a solar installation by signing a rental agreement. These would be two separate agreements.
Yes, you can. However, these would be two separate agreements. You can invest in the limited partnership and then be a customer of the same partnership through a rental agreement.
You will need to become a customer of the limited partnership and sign a rental agreement.
Section 12B of the Income Tax Act provides for a capital allowance for movable assets used in the production of renewable energy. More specifically, it allows for a 100% capital depreciation allowance in the year that an investment is made in certain qualifying and specified alternative energy equipment. If the equipment does not meet the qualifications, then the normal depreciation allowance – on a 50|30|20 basis over three years – would apply to any machinery, plant, implement, utensil or article (referred to as a qualifying asset) owned by a taxpayer.
It is important to note that the allowance is available only if the asset is brought into use for the first time by a taxpayer. In other words, the incentive can be applied to both new and unused assets. This wording prevents a taxpayer from claiming the Section 12B allowance twice on the same asset.
The asset has to be brought into use, for the taxpayer’s trade, to generate electricity from the following renewable energy sources:
- wind power;
- solar energy;
- hydropower (gravitational water forces) to produce electricity of not more than 30 megawatts; and
- biomass, comprising organic wastes, landfill gas or plant material.
For further details, you are welcome to engage with the tax experts with whom IES has partnered.
Please submit any further questions you have below:
