South Africa’s 12L Tax Incentive Encourages Corporates to Save on Energy

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  • The energy efficiency savings tax incentive (Section 12L), which was extended for three more years in the 2019 Budget speech, enables small and large businesses to save as much as 30% on their energy bills.
  • The tax incentive is also aimed at reducing companies’ carbon footprint and assisting in reducing the demand for South Africa’s scarce energy resources.

“The current rebate of 95c/kWh saved on energy consumption has proven to be of great interest to industry, as more and more businesses sign up with us,” explains Barry Bredenkamp, general manager for energy efficiency at the South African National Energy Development Institute (SANEDI).

“The 12L tax incentive’s objective is two-fold – to encourage energy saving in a constrained capacity environment and to assist in meeting the country’s commitments to reduce carbon emissions over the next few years.”

Claiming on the tax incentive

In order to claim the deduction, measurements must be kWh equivalent. The verified and measured energy efficiency saving must be over a period of 12 consecutive months, known as the implementation/assessment period, which is compared with the prior 12 months of baseline measurement.

The baseline measurement and savings are verified and measured by a South African National Accreditation Systems (SANAS) accredited Measurement and Verification (M&V) Body, which assigns an M&V professional to the project.

In order to apply for the incentive, a company would appoint an accredited (M&V) professional to do an assessment of its business, no matter whether it is a plant, a hotel or normal office premises.

Currently, residential households are excluded from applying for this incentive. The assessor will submit all the information to SANEDI and from there it would proceed with an evaluation to ascertain whether the claim is in line with the appropriate regulations and standards, and can be approved.

The incentive allows tax deductions for the saving of gas, coal, liquid fuels or any energy carrier, (excluding renewable energy).

More SARS activities included

SARS has updated the section on qualifying activities in their Interpretation Notes, to not only include activities generating energy from combined heat and power, but any activity that results in energy efficiency savings, given that all other requirements are met and limitations do not apply.

“In some instances, we have seen customers save up to 30% on their energy bill and in addition receive a tax allowance on their tax return,” continues Bredenkamp. “There is a calculator on our website, where one can check the feasibility of applying for the incentive and get an indication of what the benefit will be.

“There have been in excess of two-hundred applications over the period so far, with many of these being blue-chip South African companies. We are excited that this window of opportunity has been extended for a further three years and we may possibly be able to double the number of applications,” he concludes.

Who is SANEDI?

The South African National Energy Development Institute (SANEDI), was established by the Government. The organisation directs, monitors and conducts applied energy research to develop innovative, integrated solutions to catalyse growth and prosperity in the green economy.

It drives scientific evidence-driven ventures that contribute to youth empowerment, gender equity, environmental sustainability and the 4th Industrial Revolution, within the National Spatial Development Plan, through consultative, energy-efficient projects.  For more information, go to

Author: Nicolette Pombo-van Zyl

This article was originally published on ESI Africa and is republished with permission with minor editorial changes.


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