Frequently Asked Questions (FAQs)
General and Individual FAQs
You can find Section 12B of the Income Tax Act No. 58 of 1962 through the following SARS link:
As the general partner, IES holds unlimited liability.
The company is Impact Energy Solutions (IES). It partners with several suitable qualified installers around the country to provide solar and other green 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 will be 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 R2500, 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 2024. Your tax credit should fund most of the required repayment.
The partnership business will be able to meet the outstanding loan balance, and no further contributions will be required from you.
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 initiation fee paid within one month of submitting your completed documents, in order to qualify for the Financial Year End 2023 / 2024 (the 28th of February 2024).
We will point out that the sooner you submit your paperwork and pay over your securing deposit, the sooner you will be allocated a place within a partnership of your choice, however, once those places are filled, you would have to look at another project.
All submissions need to be completed in full before the 28th of February 2024 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 2024 / 2025 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 2024. 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 2024.
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 two.
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. After that time disbursements will commence.
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.
The documentation provides you with the opportunity of selecting to invest for multiple years and if you choose to do so immediately, you will not be required to pay the securing deposit for each year.
No, your tax credit is invested into a limited partnership which will own and operate solar projects.
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.
Corporate Specific FAQs
In most cases the accounting for this investment would be classified as a joint operation. In this case the client would have to account for their share of assets and loans within their books from this partnership to show they are eligible to deduct the S12B allowance and the other entry being the loan account. The potential issue we can perhaps see is the possibility that the client may have to account for the loan which can diminish the value of their balance sheet. However due to this being a limited partnership the loan amount is not technically owing from the company but should be recognised as the company will be paying off the loan from its profits from the partnership. The other entry would be their share of assets to be recognised and this can be depreciated over time. I think it would be best to show how this is done in person and for the client to understand the implications.
In multiple clauses, the loan agreement makes it clear that this is an En Commodite Partnership, and the only risk to the client/company is the Capital amount (12B rebate) and profits paid off on the loan amount. There is no recourse to the investor themselves, whether an individual or a company, see Clause 4 of the loan agreement.
Yes. This is stated in the Commitment to Participate document, in Clause 4.c. of the Checklist.
A set of accounts, showing the projected profits, or the balance sheet from previous tax year.
Your investment is not related to whether or not you are a client of the partnership. An individual must be a member of an En Commodite partnership to qualify for a 12B refund. There is however nothing stopping a company from installing its own solar and claiming the 12B refund.
We encourage you to contact us directly and arrange a meeting to discuss the nature of your company and your specific requirements. We can then design a tailor-made solution for you.
At the moment this can be done every year, until the income tax act is changed
Partnership ring fencing refers to limiting your cashflow risk exposure to your obligations to the partnership, while benefitting from the income and taxable deductions.