Firstly VAT portion can be deducted by VAT registered SMEs. Also – according to section 12B (hyperlink) of the Income Tax Act – SMEs can write off the full cost of the solar energy solution from their business income tax in the first year.
Cost of system: R500,000 (incl VAT)
VAT deduction: R70,000
12B depreciation provision: R120,400 decrease in payable tax based on the EX VAT amount that can be written off. Effective cost: R309,600