Abstract
Section 12L of the South African Income Tax Act (12L) aims to incentivise businesses to become more energy-efficient. However, claiming this benefit is a complex process that can become difficult, time-consuming, and costly if not clearly understood. It is therefore important to evaluate the feasibility of potential 12L applications before any unnecessary expenses are incurred or time is wasted. This article provides a brief overview of 12L and its associated literature before presenting a simplified feasibility evaluation strategy. The strategy consists of three key evaluation steps designed to identify potential issues quickly. The identified issues are linked to specific South African National Standards (SANS) guidelines to ensure that the issues can be resolved in a 12L-compliant manner. The strategy is applied to 47 industrial case studies. Some detailed results are presented to give a practical illustration of how the strategy works. The generalised results are further used to illustrate the potential benefit in time and cost reduction.
Highlights
South Africa is an energy-intensive country due to various mining and industrial activities [1]
Mining and other large industries use about 45 per cent of the total national energy consumed within South Africa [2]
Ever since the country’s energy supply became a concern, the government committed itself to promoting energy efficiency (EE), and so introduced the 12L tax incentive [3] [4]
Summary
South Africa is an energy-intensive country due to various mining and industrial activities [1]. Mining and other large industries use about 45 per cent of the total national energy consumed within South Africa [2]. The incentive aims to motivate companies to reduce their energy use and become more energyefficient. The process of applying for such a tax deduction can, be very challenging [5] [6] (Steyn, M&V Standard for 12L tax incentives 2014). Strict rules must be adhered to when applying for the 12L deduction, as described in the National Tax Act [8], the Regulations [9], and the Standard [10]. The EE savings must be verified and the data must be traceable, accurate, and transparent
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