In South Africa, we realise the importance of nurturing SMEs (small and medium-sized enterprises): They play a vital role in developing our growing economy, creating much-needed jobs and driving innovation. At the same time, as the proverbial small fish in the big pond, they face many challenges such as securing the funding they need, complying with all of the country’s legislative requirements and keeping head above water in competitive industries. It’s clear that SMEs need all the help they can get, especially when it comes to relieving some of the financial strains and stresses of running a business.
Indeed, many SME owners toss and turn over money matters at night. Especially tax is a pebble in the shoe for many businesses, big and small. Not only is it tricky to navigate the world of tax (especially if you’re new to business), but it’s never easy to part with one’s hard-earned money.
Tax incentive for installing solar PV
That’s why it’s great news for SMEs that SARS offers business owners certain tax concessions for utilising renewable energy – specifically a special tax incentive for installing solar PV (photovoltaic) energy solutions.
Cala van der Westhuizen from Energy Partners, a renewable energy solutions supplier, explains that solar energy systems such as theirs hold tax perks for businesses from the get-go. “Financially it makes good sense for businesses to install a solar PV system as they can deduct the VAT portion which is already 14% of the total cost if they are VAT-registered,” he says.
Deduct cost of installation
The second big tax advantage, is that business owners can deduct the full cost of the installation of a solar energy solution from their business income tax in the first year, according to the terms of Section 12B of the Income Tax Act. This 100% accelerated capital allowance applies to business solar PV solutions that produce less than 1 megawatt of power.
Pay less carbon tax
Government’s purpose with this allowance is to encourage the use of renewable energy in the business sector by for instance supporting smaller solar PV energy projects that have a low environmental impact and use little water. Which brings us to another tax benefit of installing solar PV: This year, government is introducing a carbon tax for businesses that emit excessive amounts of greenhouse gasses through especially transportation vehicles and electricity generation. As a low-carbon source of energy, solar power can help businesses to become greener and therefore avoid carbon tax.
Savings on electricity bill
The financial benefits of installing an efficient business solar solution go beyond tax concessions. With a state-of-the-art, efficient system from Energy Partners, SMEs can significantly cut their monthly electricity bills. An Energy Partners SME solar solution can pay for itself with what the business saves on electricity. “The repayment term of a solar PV system for a commercial installation is close to around 4 years, depending on certain factors like self-consumption and the tariff structure. With solar panels that have a 25-year production warranty, it’s very much like buying 25 years’ prepaid electricity at 5 years’ cost,” Van der Westhuizen says.
He adds: “Energy Partners Home Solutions also offer various financing options for SMEs that don’t have the capex available to purchase the system outright. As a registered financial services provider, many of our clients purchase a system that is financed by us and which they can easily pay off out of the operational budgets of their businesses. In certain cases, we can even offer a Performance Lease Agreement, which allows for the installation of the system at a fraction of the cost.”
It’s clear that, if you’re an SME owner, you can’t afford not to consider a renewable energy solution that looks after the environment and your all-important cash flow. If you’re interested in putting the financial benefits of a solar PV solution to work in your business, contact Energy Partners for a free, no-obligation energy assessment.
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