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Every South African business is competing against two opponents every month, the electricity bill and the tax bill, and a well-designed solar system lets you take on both in the same move. Section 12B of the Income Tax Act lets a business deduct the full cost of a qualifying solar PV system from its taxable income in the year the system starts generating power, so the money you put onto your roof starts working for you within the same tax year. Plenty of businesses leave part of this deduction on the table through poor timing, unclear ownership or thin paperwork, so here is how the incentive works in 2026 and how to claim every rand you are entitled to.
Where solar tax incentives stand in 2026
The last few years produced a flurry of solar incentives, and it helps to know which ones are still in play. The enhanced Section 12BA allowance gave businesses a once-off 125% deduction on renewable energy assets brought into use between 1 March 2023 and 28 February 2025, and the Finance Minister let the 125% allowance lapse in the March 2025 Budget. Homeowners had their own window with the Section 6C rooftop solar rebate, which covered panels installed between 1 March 2023 and 29 February 2024. Finance Minister Enoch Godongwana tabled the 2026 Budget in Parliament on 25 February 2026, directing its tax relief towards households through fully inflation-adjusted personal income tax brackets and leaving the renewable energy allowances as they stand in the 2026 Budget Review’s tax proposals. Section 12B sits in the Income Tax Act without a sunset date, and SARS sets out how its 100% and 50/30/20 deductions apply in its official guide to allowances for assets used to generate electricity. That gives you the freedom to plan a project around your operations and your load profile at a pace that suits your business.
How the Section 12B deduction works
Section 12B runs on two tracks, and the size of your solar system decides which one you are on. Solar PV systems up to 1MW qualify for a 100% deduction in the year they are brought into use, while larger PV systems, along with wind, concentrated solar, hydropower up to 30MW and biomass, are written off over three years at 50%, 30% and 20%. Industry lobbied National Treasury to lift the 1MW threshold so that bigger PV projects could also claim everything in year one, and the 2025 Budget confirmed the threshold would stay in place, so it is a firm line for planning purposes.
The detail that gives sharp operators an edge is that neither track is pro-rated. A system commissioned on the final day of your tax year earns the same full year-one deduction as one switched on the first day. A company with a February year-end that brings a qualifying system into use in late February claims the entire allowance against that year’s income, which turns the commissioning date into one of the most valuable dates on your project plan.
To put numbers to it, picture a manufacturer that installs a 200kW rooftop PV system for R2 million. At the company tax rate of 27%, the R2 million deduction reduces that year’s tax bill by R540,000, and the system keeps trimming the electricity bill every sunny day after that. A larger operation commissioning a 1.5MW plant for R15 million deducts R7.5 million in the first year, R4.5 million in the second and R3 million in the third, which works out to tax savings of roughly R2 million, R1.2 million and R810,000 across those three years. Our breakdown of commercial solar system costs in 2026 shows what systems of different sizes cost, and the deduction feeds straight into the payback period calculation.
What counts as a qualifying cost
The allowance covers the direct cost of acquiring the solar assets together with the cost of erecting, installing and constructing them, and it extends to the concrete, foundations and supporting structures the system is mounted on. Panels, mounting structures, inverters and the cabling that makes up the generating system all sit comfortably inside that definition.
Battery energy storage systems are increasingly being integrated into commercial and industrial solar installations to improve energy utilisation, manage peak demand and provide backup power. However, battery storage does not automatically qualify for the Section 12B allowance. The tax treatment depends on the equipment’s function, configuration and applicable legislation. Businesses should obtain advice from a registered tax practitioner before including battery storage costs in a Section 12B claim.
Some project costs fall outside Section 12B and find a home elsewhere in the Act. Lines and cables used to transmit electricity are written off at 5% a year under Section 12D, and other assets can be claimed under the general wear-and-tear allowance in Section 11(e). Each asset sits under one allowance only, so an itemised quote that separates generating equipment from everything else makes your accountant’s job far easier.
Who can claim Section 12B
The deduction belongs to taxpayers carrying on a trade who use the system in that trade to generate electricity, and it goes to whoever owns the asset. Companies, trusts and sole proprietors that power income-earning operations all qualify, as do businesses that buy their system through an instalment credit agreement, which counts as ownership for these purposes. A system powering a private home sits outside the allowance.
Ownership is where the real money changes hands. When a business rents its system under a power purchase agreement or an operating lease, the funder owns the assets and claims the deduction while the business pays for the electricity it uses. Industry had hoped the 2025 Budget would ease the leasing restrictions, and Treasury chose to keep Section 12B unchanged. A business with taxable income and access to capital or finance puts the full deduction on its own tax return by owning its system outright.
Investors who pool money through en commandite partnerships to own solar assets can each deduct their share of the partnership’s Section 12B allowance, because each limited partner is treated as carrying on the partnership’s trade. SARS has published binding class rulings on exactly these structures, including BCR 85 and BCR 88.
Getting the paperwork and timing right
You claim the allowance in the year of assessment in which the system is brought into use, so the commissioning date and your supporting documents carry real weight if SARS ever comes asking. Keep the supplier invoices, proof of payment, ownership or instalment credit documents, the electrical Certificate of Compliance and the commissioning records together in one file. Jerome Brink, a tax director at Cliffe Dekker Hofmeyr, cautions that Section 12B looks simple next to most tax provisions, yet in inexperienced hands it can lead to unwanted consequences, including losing the allowance altogether. Bringing a registered tax practitioner with renewable energy experience into the conversation while the system is still being designed saves a great deal of untangling later.
It also pays to think long term. If you sell the system later, the deduction you claimed is brought back into income up to the amount you receive for it, so the allowance rewards businesses that install for the long haul and let the system earn its keep for years.
Let the engineering lead and the tax benefit follows
The strongest Section 12B outcome starts with a system designed around how your business actually uses power. A power audit shows when your load peaks, how much daytime consumption solar can cover and where storage earns its place, and that design determines both your energy savings and which side of the 1MW line you land on. A system above 1MW still deducts its full cost over three years, so the right size is the one your operation genuinely needs.
Rentech has been helping South African businesses take control of their energy since 2001, and our in-house EPC team handles the whole journey, from power audits and system design through procurement, installation and commissioning to the electrical CoC, registrations and ongoing maintenance. That end-to-end delivery gives you a clear commissioning date, a properly documented asset and an itemised cost breakdown your tax practitioner can work with straight away. If you want to see what Section 12B could do for your bottom line, book an assessment and our engineers will size a system around your load profile and site.
This article is general information reflecting the position in October 2026. Speak to a registered tax practitioner about your specific circumstances before making a claim.