Clarification on Section 12L Energy Efficiency Tax Incentive by SARS

The South African Revenue Service (“SARS”) issued interpretation note 95 (issue 2) dated 11 January 2019. The interpretation note provides more clarity on a number of issues relating to the section 12L deduction for energy efficiency savings (“section 12L”) that were previously not clear. The intention of this newsletter is to provide the reader with a summary of the main updates that were affected and clarity provided in the interpretation note. Refer to the different points below –

  1. SARS rely on calculations approved by SANEDI – Confirmation was provided that SARS accepts the contents and calculations reflected in an energy efficiency certificate issued by SANEDI due to the technical nature thereof. SARS however still needs to be satisfied that all other requirements of section 12L are complied with, for example, that the savings must be derived from activities performed in the carrying on of a trade.
  • Qualifying activities updated – The section on qualifying activities was updated 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. This clarification was made to correct an oversight and incorrect interpretation of the legislation in the previous version of the interpretation note that was published in 2017.
  • Concurrent benefit clarification – The interpretation note was updated in line with the interpretation we have been practicing. Clarity has been provided that should something other than energy efficiency savings or the sale and purchase of electricity be incentivised, the benefit thereof will not be seen as a concurrent benefit under section 12L.   

Section 12L and the section 12I Industrial Policy Projects tax incentive can thus both be claimed on the same project without it being regarded as a concurrent benefit. This has been explicitly stated in the interpretation note.

The full interpretation note is available on the SARS website:

For more information or to further understand the implications for your company, contact Joslin Lydall on or +27 (0) 84 299 6873.

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