n Business Tax and Company Law Quarterly - Taxpayers' allowance for energy-efficiency savings in the age of loadshedding : section 12L of the Income Tax Act illuminated

Volume 6, Issue 2
  • ISSN : 2219-1585


Section 12L of the Income Tax Act was introduced in 2009 to create a special taxpayers' allowance in respect of energy-efficiency savings, and at incentivising taxpayers to use energy more efficiently as a means of promoting energy security and combating climate change.

The original version of section 12L was replaced by a completely new provision - the current version of section 12Lâ??- which came into operation on 1 November 2013.
This article examines and explains the scope of the current version of the section and the regulations issued under section 12L(5) with effect from the same date. The requirements of the section are analysed in detail. The regulations which complement section 12L are also fully analysed. These regulations are designed to implement the tax allowance by providing for the taxpayer to submit a report by an energy measurement and verification specialist to an independent body - the South African National Energy Development Institute ('SANEDI'). SANEDI is required to consider the report and to confirm and certify the savings in kilowatt-hours or the equivalent thereof. In terms of section 12L(2) the deduction must be calculated at the rate of 45 cents per kilowatt-hour of energy-efficiency savings.
The article emphasises that the section, read with the regulations, therefore contemplates the submission by the taxpayer claiming the allowance of a technical report prepared by an energy professional in compliance with a South African National Standard (SANS 50010, Measurement and Verification of Energy Savings) issued by the South African Bureau of Standards in terms of the Standards Act 8 of 2008. Hence only a report by a technical expert with the necessary skills, that is an accurate reflection of the energy-efficiency savings of the claimant, will pass muster in the certification process, and justify the deduction allowed by section 12L.
The article further considers the question whether the current version of section 12L, which became effective on 1 November 2013, is applicable to the energy-efficiency savings achieved in the whole of the year of assessment which commenced on 1 January 2013 or 1 March 2013, as the case may be, or whether, as apparently contended by SARS, there must be an apportionment of the deductions, so that only the portion relating to the remaining period of the years of assessment after 1 November 2013 can be claimed.
The article analyses the relevant language, context and purport of the provision and concludes, with reference to authoritative judicial decisions on the interpretation of statutes, that, properly construed, section 12L in its current form applies to all years of assessment ending after 1 November 2013, but before 1 January 2020. The article submits that the correct interpretation is that this must include the full year of assessment which commenced on 1 January 2013 or 1 March 2013, and which is 'a year of assessment' for purposes of the section 12L allowance.
The article concludes by considering the interesting issue as to the whether the contents of the regulations under section 12L have any bearing on the question of interpretation involved. In answering this question in the negative, the author refers to a number of authoritative decisions of the Supreme Court of Appeal and the Constitutional Court in which it has been held that it is not permissible to use regulations issued under an Act as an interpretative aid, as if they and the Act itself were a single piece of legislation.

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