Section 12B Solar Tax Benefit: What South African Businesses Need to Know in 2025/2026
If you're considering commercial solar, the Section 12B tax incentive could be the difference between a good investment and a great one. It allows you to deduct 100% of your solar system's cost against taxable income in the year it's brought into use.
Here's exactly what you need to know — including the important update about Section 12BA.
What Is Section 12B?
Section 12B of the Income Tax Act (No. 58 of 1962) provides an accelerated depreciation allowance for certain assets used in electricity generation. For solar PV systems under 1MW, the full cost can be deducted in a single tax year.
In plain terms: Buy a R1.5 million solar system, deduct R1.5 million from your taxable income that year. At the 27% corporate tax rate, that's a R405,000 tax saving.
This isn't a credit or a rebate — it's a deduction. It reduces your taxable income, which reduces your tax bill. The benefit is proportional to your tax rate.
Section 12BA Has Expired — Here's What Changed
Section 12BA offered a more generous 125% deduction for qualifying renewable energy assets brought into use between 1 March 2023 and 28 February 2025. This was a temporary incentive designed to encourage investment during the energy crisis.
As of 1 March 2025, Section 12BA has expired. The Finance Minister did not renew it in the 2025 Budget Speech.
What this means for you:
- Systems brought into use before 28 February 2025 → may qualify for 125% deduction under 12BA
- Systems brought into use from 1 March 2025 onward → qualify for 100% deduction under 12B
- The 100% deduction is still substantial and remains in effect
On a R1.5 million system:
| Provision | Deduction | Tax Saving (27%) |
|---|---|---|
| Section 12BA (expired) | R1,875,000 (125%) | R506,250 |
| Section 12B (current) | R1,500,000 (100%) | R405,000 |
| Difference | R375,000 | R101,250 |
You're still getting a R405,000 tax saving on a R1.5 million investment. That's 27% of your capital back in year one.
Eligibility Requirements
To claim Section 12B, your solar system must meet all of these criteria:
- New and unused — The assets must not have been used by anyone else before
- Owned by the taxpayer — You must own the system (PPAs don't qualify — the PPA provider owns it)
- Used in your trade — The system must generate electricity for use in your business operations
- Brought into use — The system must be commissioned and operational within the tax year you're claiming
- Under 1MW — The system's generation capacity must not exceed 1 megawatt (1,000kW)
What qualifies for the deduction:
- Solar panels
- Inverters
- Battery storage systems
- Mounting structures and foundations
- Installation costs directly related to the above
What doesn't qualify:
- General electrical upgrades unrelated to the solar system
- Building modifications not directly supporting the installation
- Monitoring software subscriptions
- Maintenance contracts
How to Claim — Step by Step
- Install your system — Ensure it's commissioned and generating power
- Gather documentation — Invoice breakdown showing qualifying assets, CoC, technical specifications
- Confirm with your tax advisor — Have them verify your eligibility before filing
- Claim on your ITR14 — Include the deduction in your annual tax return for the year the system was brought into use
- Keep records — SARS may request supporting documentation
Timing tip: If your financial year-end is approaching, getting your system installed and commissioned before year-end means you claim the deduction sooner. A system commissioned on 28 February gives you the tax benefit months earlier than one commissioned on 1 March.
Common Mistakes to Avoid
Claiming on a PPA system — If you have a Power Purchase Agreement, you don't own the system. The PPA provider owns it and claims the deduction. You can't claim 12B on a system you don't own.
Missing the "brought into use" requirement — The system must be commissioned and generating electricity, not just installed. A system sitting on your roof awaiting grid connection doesn't yet qualify.
Not getting the right documentation — Ensure your installer provides a detailed invoice separating qualifying assets from non-qualifying items. Gentricity provides 12B-ready invoicing as standard.
Forgetting about assessed losses — If you have no taxable income (assessed loss), you can carry the deduction forward. The benefit is deferred, not lost. Discuss timing with your tax advisor.
How 12B Interacts with Financing
| Financing Method | Own the Asset? | Claim 12B? | Notes |
|---|---|---|---|
| Cash purchase | Yes | Yes | Full deduction in year one |
| Asset finance | Yes | Yes | You own it; bank provides the loan |
| PPA | No | No | PPA provider owns and claims |
| Rental/lease | Depends | Maybe | Depends on lease structure — consult tax advisor |
The key insight: asset finance lets you claim 12B without deploying full capital. Finance the system over 7 years, claim the full R1.5 million deduction in year one, and use the R405,000 tax saving to cover 13+ months of loan repayments.
More on asset finance → | More on PPAs →
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Make the Most of Section 12B
Every month you wait, you're paying full Eskom rates without the tax benefit offsetting your investment. Our free assessment includes a full Section 12B calculation specific to your system and tax position.
Get Your Free Assessment → Or call Albert directly: (083) 287 5986