Tax incentives for green initiatives

South Africa’s greenhouse gas emissions rank among the top 20 in the world and contribute 1,8% to global emissions. The country is also responsible for 42% of Africa’s emissions. To counter these grim figures, tax allowances have been made for certain environmental actions.

Section 37B of the Income Tax Act was introduced at the end of 2007 and provides for the deduction of capital expenditure in respect of environmental treatment and recycling assets and environmental waste disposal assets.

Environmental treatment and recycling assets

This refers to any air, water and solid waste treatment and recycling plant or pollution control and monitoring equipment if the plant or equipment is utilised in the course of a taxpayer’s trade in a process that is ancillary to any process of manufacture.

In this case, the deduction equals a tax allowance of 40% of the cost of acquisition in the first year of assessment, and 20% in every succeeding year thereafter.

Environmental waste disposal assets

This refers to any air, water and solid waste disposal site, dam, dump, reservoir, or other structure of a similar nature, or any improvement thereto, if the structure is of a permanent nature and utilised in the course of a tax payer’s trade in a process that is ancillary to any process of manufacture.

The deduction in this case comprises a capital allowance of 5% of the cost of acquisition in the first year of assessment, and 5% in every succeeding year thereafter.

For more information or professional assistance, contact Jan Frank of Tenk Loubser & Associates in Somerset West on tel. 021 852 0382 or e-mail jan@exceed.co.za.