Launched
1
Active

Section 12B Alternative Energy Investments

Section 12B of the South African Income Tax Act provides a legislated tax allowance for renewable energy-generating assets used in the course of a taxpayer’s trade.
The incentive allows taxpayers to recover the cost of qualifying renewable energy assets through accelerated capital allowances, thereby reducing taxable income while encouraging private investment into renewable energy infrastructure.
Qualifying renewable energy assets include capital equipment used to generate electricity from renewable sources such as:
  • Solar photovoltaic (PV) systems
  • Wind energy installations
  • Hydropower systems
  • Biomass generation facilities
  • Concentrated solar power
The incentive allows investors to benefit from accelerated tax deductions while participating in infrastructure assets that contribute to South Africa’s energy transition.
FutureDev Invest structures renewable energy investment opportunities that align with these legislated frameworks where appropriate.
Enquire

FAQ's

Section 12B is a South African Income Tax Act provision that allows taxpayers to claim accelerated depreciation (wear-and-tear) deductions for qualifying renewable energy assets used in the conduct of their trade.
Individuals, companies, trusts, and other taxpayers that generate taxable income and acquire qualifying renewable energy assets for use in their trade may be eligible.
If an investor installs qualifying renewable energy generating assets:
  • For systems under a 1 MW threshold, a 100 % deduction in the first year is possible;
  • For larger systems, deductions are on a 50/30/20 basis over three tax years.
This allows investors to significantly reduce taxable income in the early years of the asset’s life.
Qualifying assets include plant, machinery, implements and other equipment used to generate electricity from:
  • Solar PV or concentrated solar;
  • Wind power;
  • Hydropower (within specified thresholds);
  • Biomass energy sources.
  • Foundations or supporting structures designed for generating assets also qualify.
Section 12B is the standard renewable energy accelerated allowance, while Section 12BA is a temporary enhanced incentive permitting a 125 % deduction for assets commissioned in a defined window (typically 1 March 2023 – 28 February 2025).
Taxpayers may claim under one section per qualifying asset — not both.
Yes — investment structures (e.g., funds or pooled capital structures) can allow participation from modest entry points such as R100 or higher, enabling broader investor access to Section 12B-qualified renewable energy assets.
(This reflects typical structuring in pooled investment programmes; individual tax positions depend on personal tax circumstances.)
If batteries, inverters, or integrated energy storage components are part of a renewable energy generation system and used to produce electricity for taxable trade, they may be treated as qualifying generation assets. SARS rulings indicate these can form part of the eligible cost base where they are integral to the generating system.
  • You cannot claim multiple allowances (e.g., Section 12B and Section 12E) for the same asset in the same year.
  • Personal solar installations for domestic use do not qualify unless they generate taxable income (e.g., rental or trade use).
  • Assets must be brought into use for the first time to qualify.
Accelerated allowances reduce taxable income in early years, thereby lowering tax liability. For example, a R1 million qualifying investment could reduce taxable income by the same amount in year one for smaller systems — materially improving after-tax returns.
Qualifying expenditures and asset details should be included in your annual tax return (ITR14 for companies; ITR12 for individuals or trusts using trade assets). Keep comprehensive records, including proof of purchase, commissioning dates, and usage evidence.
Always consult a tax professional or SARS interpretation notes to ensure correct application.