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Section 12B / 12BA Renewable Energy Tax Allowances

The South African Income Tax Act provides accelerated depreciation allowances for businesses that invest in renewable energy generation. These allowances let you deduct the cost of qualifying assets (solar PV panels, wind turbines, supporting structures) from your taxable income faster than the standard write-off period, reducing your tax bill in the early years of the investment.

There are two key provisions: Section 12B (permanent, still active) and Section 12BA (a temporary enhanced incentive that expired on 28 February 2025). Understanding the difference between them is critical for any business considering a renewable energy investment in 2026.

Section 12B
50/30/20 or 100%
permanent, still active
Section 12BA
125% (Expired)
ended 28 Feb 2025
Solar PV 100%
Up to 1 MW
year-one full deduction
In Effect Since
2004 / 2005
section 12B first introduced

Section 12B vs Section 12BA

Section 12B

Active
50 / 30 / 20

Accelerated depreciation over 3 years: 50% in year one, 30% in year two, 20% in year three. For solar PV installations up to 1 MW, a 100% deduction in year one is available.

Who can claim: Any taxpayer carrying on a trade (companies, sole proprietors, partnerships, trusts). Must own the asset or have acquired it through an instalment credit agreement.

Still available: Section 12B is permanent legislation. It continues to apply to qualifying assets brought into use from 2026 onwards with no expiry date.

1 MW threshold: The 2025 Budget confirmed this threshold will not be revised. Solar PV above 1 MW qualifies for the 50/30/20 write-off, not the 100% year-one deduction.

Section 12BA

Expired 28 Feb 2025
125%

A temporary enhanced incentive that provided a once-off deduction of 125% of the qualifying costs. No generation capacity threshold.

Window: Assets brought into use on or after 1 March 2023 and before 1 March 2025 only.

Not renewed: The 2025 Budget Speech confirmed Section 12BA was not extended. Assets brought into use after 28 February 2025 do not qualify for this enhanced allowance.

Recoupment: If you claimed 12BA and dispose of the asset before 1 March 2026, the full 125% is recouped. From 1 March 2026 onwards, standard recoupment rules apply (lesser of proceeds and 125%).

Qualifying Renewable Energy Sources

Both Section 12B and the expired 12BA apply to assets used to generate electricity from the following sources.

Wind Power
Wind turbines and towers
Photovoltaic Solar
PV panels, inverters, racking
Concentrated Solar
CSP thermal systems
Hydropower
Run-of-river, small hydro
Biomass
Organic waste, landfill gas, plant material

Current Deduction Rates (Post-February 2025)

With Section 12BA expired, here is what businesses can still claim under Section 12B.

Scenario Deduction Spread Notes
Solar PV up to 1 MW 100% Year 1 only Full deduction in the year asset is brought into use
Solar PV above 1 MW 50/30/20 Over 3 years 50% year one, 30% year two, 20% year three
Wind turbines (any size) 50/30/20 Over 3 years Includes towers and foundations
CSP, hydro, biomass 50/30/20 Over 3 years Same accelerated rate
Foundations & structures 50/30/20 Over 3 years Supporting structures qualify separately
Section 12BA (expired) 125% Year 1 only Only for assets brought into use before 1 March 2025

The 1 MW Threshold Stays

Many businesses hoped the 2025 Budget would raise the 1 MW threshold for the 100% year-one solar PV deduction. National Treasury confirmed that after careful assessment, this threshold will not be revised. If your solar PV installation exceeds 1 MW, you can still claim the accelerated 50/30/20 write-off over three years, but not the full 100% deduction in year one.

Section 12BA Has Expired

The 125% enhanced incentive under Section 12BA was not renewed in the 2025 Budget Speech. Any renewable energy assets brought into use after 28 February 2025 are not eligible for this allowance. If you claimed 12BA on assets brought into use during the qualifying period, be aware of the recoupment rules if you sell those assets: full 125% recoupment on disposals before 1 March 2026, and standard recoupment (lesser of proceeds or 125%) on disposals from 1 March 2026 onwards.

Do Batteries and Inverters Qualify?

SARS Binding Class Ruling 88 (issued February 2024) confirms that batteries integrated into a renewable energy system qualify for the Section 12B allowance, because they form part of the system that generates electricity. Storage assets that only draw from the grid and store it (without being connected to a renewable source) do not qualify. Inverters, overhead power infrastructure, towers, and accessories integrated into the system also qualify.

Other Tax Allowances for Energy Assets

Not all renewable energy costs fall under Section 12B. These additional provisions may apply to specific assets.

Section 12D
Electricity Transmission Lines

5% annual allowance (20-year write-off) on lines, cables, and pipelines used for electricity transmission or water transportation. Covers grid-connection infrastructure that does not qualify under 12B.

Section 12U
Roads, Fences & Foundations

Deduction for costs incurred on construction of roads, fences, foundations, and supporting structures used specifically for renewable energy generation. Covers infrastructure around wind farms and solar parks.

Section 11(e)
General Wear and Tear

Standard depreciation allowance for plant and machinery used in a trade. Applies to energy-related assets that do not qualify under the specific renewable energy sections. Write-off period determined by SARS guidelines.

Section 12E
Small Business Corporations

SBCs can deduct 100% of the cost of any new plant or machinery brought into use in the year of assessment. Cannot be combined with Section 12BA (but can apply alongside 12B for different assets).

Get Professional Tax Advice

The interaction between Section 12B, 12BA (for past claims), 12D, 12E, 12U, and government grants is complex. If you received a government grant towards your renewable energy installation, you can only claim the allowance on the portion paid from your own funds. Partnerships (en commandite structures) have additional rules under Section 24H. Before claiming, consult a registered tax practitioner who understands SARS binding rulings and the specific requirements of each section.

Common Questions

Section 12B applies to taxpayers carrying on a trade. If you are an individual running a business (sole proprietor), you can claim Section 12B on qualifying assets used in that trade. However, a salaried employee installing solar panels on their home for personal use cannot claim 12B. There was a separate Section 6C solar rebate for individuals (up to R15,000 for solar PV panels installed at a residence), but this was also a temporary measure. Check with SARS for the current status of individual solar incentives.
No. You must choose one or the other for any given asset. You cannot claim both Section 12B and Section 12BA on the same asset. Since Section 12BA has expired, this is now only relevant for assets brought into use before 1 March 2025 where a taxpayer elected 12BA at the time.
The asset must be brought into use for its intended purpose during the relevant tax year. Evidence can include generation and utilisation reports, metering data, electricity sales contracts, and invoices confirming the system is operational. Simply purchasing or installing the asset is not sufficient. The onus is on the taxpayer to prove when the asset was brought into use.
If you used a combination of your own funds and a government grant, you can only claim the allowance on the portion paid from your own funds. For example, if the total cost is R1,000,000 and you received a R400,000 grant, you can claim the allowance on R600,000 only.
Section 12B requires you to own the asset or have acquired it through an instalment credit agreement (hire-purchase). If you are merely leasing the equipment under an operating lease, the lessor (owner) claims the allowance, not you. However, Section 12BA specifically allowed a lessor who installs qualifying assets that are brought into use by the lessee to also claim. Since 12BA has expired, the standard 12B ownership rules apply.
Standard recoupment rules apply. The deductions you previously claimed are "recouped" (added back to taxable income) to the extent of the sale proceeds. For Section 12BA claims specifically: if you dispose of the asset before 1 March 2026, the full 125% is recouped if the proceeds equal or exceed the original cost. From 1 March 2026 onwards, recoupment equals the lesser of the proceeds or the 125% allowance amount.

Important Links & Resources

Official SARS guides, National Treasury FAQs, and legal references.

SARS Guide IT39 (PDF)

Allowances for renewable energy assets

National Treasury FAQ (PDF)

Enhanced renewable energy incentive for businesses

SARS Official Website

Tax returns, rulings, and guides

National Treasury

Budget Speech, tax bills, policy

CDH: Solar Analysis

Legal commentary on BCR 88 and 12B

Mazars: 2025 Update

Post-Budget analysis of what remains

grantZA is an independent informational guide and is not affiliated with SARS, National Treasury, or any government department. This page provides general information only and does not constitute tax advice. Consult a registered tax practitioner for advice specific to your situation.