Encouraging efficient utilisation of energy through the Income Tax Act of 1962 section 12L
By Y de Lange, Energy Cybernetics
Electricity+Control February 2014 (pages 40 – 44)
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The long awaited tax allowance for energy efficiency savings was promulgated during November 2013. It is set to provide impetus to the development of the energy efficiency and measurement and verification industries in South Africa.
The signed notice of the effective date of the Regulation in Government Gazette Notice number 855 of 8 November 2013 was published as ‘Regulations in terms of Section 12L of the Income Tax Act, 1962, on the allowance for energy efficiency savings’ and declared to come into operation on 1 November 2013.
More recently, on 9 December 2013 the said Regulation 12L was promulgated and stipulates the allowance is for the purpose of determining the taxable income derived by any person from carrying on any trade in respect of any year of assessment ending before 1 January 2020. It stipulates that there must be allowed as a deduction from the income of that person an amount in respect of energy efficiency savings by that person in respect of that year of assessment. It should be noted that ‘a person’ referred to in this instance is a tax entity and in effect means that the energy efficiency allowance is not restricted to any industry, sphere of business, or any project and specific energy efficiency initiative. The allowed deduction is calculated at 45c/kWh for verified energy efficiency savings.
A baseline for the savings should be set by a measurement and verification professional under the auspices of a measurement and verification body accredited by SANAS in accordance with SABS/SANS 50 010:2011.
- The long awaited tax allowance, Regulations in terms of Section 12L, for energy efficiency savings has been promulgated.
- It will provide impetus to measurement and verification industries.
- A baseline for savings should be set by a measurement and verification professional.