# Summary

- Link: https://dearsouthafrica.co.za/income-tax-amendment-draft-bill-2019/summary/
- Published: 2019-07-31T14:33:21+02:00
- Author: dearSA

[ HAVE YOUR SAY ON THE INCOME TAX AMENDMENT DRAFT BILL](https://dearsouthafrica.co.za/income-tax-amendment-draft-bill-2019/)

### INCOME TAX

### 1. REPEAL OF THE TAX EXEMPTION FOR CERTIFIED EMISSION REDUCTIONS 

[Applicable provision: Section 12K of the Income Tax Act. No. 58 of 1962 (“the Act”)]

**Background**
 In 2009, Government introduced a tax exemption for income generated
from the sale of certified emission reduction credits arising from projects developed
under the Clean Development Mechanism (CDM) of the Kyoto Protocol. The main aim 
of the incentive was to promote investments in eligible low carbon initiatives including
renewable energy and energy efficiency projects in South Africa by partially offsetting
the high project registration, monitoring and credit verification costs incurred
by project developers.

**Reasons for change**
 In the 2019 Budget Review it was announced that Government
would repeal the tax exemption for certified emission reductions provision of section
12K of the Act on 1 June 2019. Under the Carbon Tax Act, No 15 of 2019 (“Carbon 
Tax Act”), Government allows taxpayers to reduce their carbon tax liability by investing
in low carbon projects developed under international programmes or standards such
as the CDM, Gold Standard and Verified Carbon Standard. Taxpayers will now qualify
for a carbon offset allowance of up to a maximum of 10 per cent of its total greenhouse
gas emissions under the Carbon Tax Act.

**Proposal**
 To avoid a double benefit scenario, where the same emissions reductions
lead to both an income tax exemption under section 12K of the Act and a lower carbon
tax liability for a taxpayer under the Carbon Tax Act, it is proposed that the tax
exemption for certified emission reduction units is repealed. It is proposed that
the tax exemption for certified emission reductions is repealed to become effective
from the date of introduction of the carbon tax.

**Effective date **
 The proposed repeal will come into effect on 1 June 2019.

### 2. EXTENSION OF THE ENERGY EFFICIENCY SAVINGS TAX INCENTIVE

[Applicable provision: Section 12L of the Act]

**Background**
 In 2013, Government introduced the energy efficiency savings tax
incentive to encourage investments in energy efficiency measures to help reduce 
emissions of greenhouse gases, address climate change, and promote efficient energy
use. To date, the incentive has helped to promote significant investments in energy
intensive sectors such as mining as well manufacturing amounting to about R 3 billion
in total.

**Reasons for change**
 The carbon tax came into effect on 1 June 2019 and during
the stakeholder consultations on the carbon tax, some stakeholders were of the view
that the energy efficiency savings tax incentive should be extended beyond 2020 
to ensure that there is long term policy certainty on revenue recycling commitments
made under the carbon tax. The energy efficiency savings tax incentive has a sunset
provision where only energy efficiency savings generated prior to the year of assessment
ending before 1 January 2020 will be eligible to qualify for the incentive.

**Proposal**
 To cushion households and energy intensive industries from potential
adverse impacts after the introduction of the Carbon Tax Act, and to help industries
transition to lower carbon, energy efficient practices, Government had agreed to
extend the duration of the incentive to be aligned with the first phase of the carbon
tax, ending 31 December 2022. It is proposed that the energy efficiency savings 
incentive be extended to allow for energy efficiency savings deductions from the
income of any person carrying on any trade in respect of year of assessment ending
before 1 January 2023.

**Effective date**
 The proposed amendment will come into effect on 1 January 2020.

## DOWNLOAD DOCUMENTS

 * [Income Tax Amendment draft Bill – 2019](http://pmg-assets.s3-website-eu-west-1.amazonaws.com/2019_Draft_Income_Tax_Amendment_Bill_-_30_July_2019.pdf)