Climate change taxation reforms and incentives in South Africa

1. Has your country ratified the Paris Agreement?

Yes, on 1 November 2016.

2. Has your country introduced environmental taxes?

 Yes.

2.1 Energy taxes

  • Electric filament lamps: Electric filament lamps (i.e. non energy saving light bulbs) are subject to the payment of an environmental levy if manufactured in South Africa. The levy is payable by the manufacturer of the lamps.
  • Electricity generation: An environmental levy is payable where electricity is generated in South Africa by using non-renewable (fossil) fuels and environmentally hazardous (nuclear) sources are subjected to the payment of an environmental levy.

2.2 Transport Taxes

  • Motor vehicle (CO2) emissions: Motor vehicle carbon dioxide (CO2) emissions above a specified threshold deemed harmful to the environment are subject to the payment of an environmental levy if used in South Africa. The objective of the levy is to influence the composition of South Africa's vehicle fleet to become more energy efficient and environmentally friendly.

2.3 Pollution taxes

  • Tyres: New, used or re-treaded pneumatic tyres, the disposal of which is littering the environment, are subject to the payment of an environmental levy, earmarked for re-cycling, if used in South Africa. The levy is payable by the manufacturers in South Africa.
  • Plastic bags: Certain types of plastic carrier and flat bags, the disposal of which is littering the environment, are subjected to the payment of an environmental levy, earmarked to establish re-cycling facilities, if used in South Africa. The levy is payable by the manufacturers in South Africa.  

2.4 Resources taxes

N/A

3. Has your country introduced a carbon tax?

Yes, carbon tax came into effect on 1 June 2019.

The carbon tax is a new tax in response to climate change, which is aimed at reducing greenhouse gas emissions in a sustainable, cost effective and affordable manner. The carbon tax is imposed on entities that operate emissions generation facilities at a combined installed capacity equal to or above the carbon tax threshold.

Due to the global COVID-19 pandemic, the filing requirement and the first carbon tax payment, which was initially due by 31 July 2020, will be delayed to 31 October 2020.

4. Does your country offer sustainability incentives (tax credits, subsidies or other business incentives) to encourage taxpayers to engage in behaviours and develop technologies that can impact positively the environment?

  • The South African Reserve Service (SARS) offers taxpayers a deduction in respect of scientific or technological research and development in terms of section 11D of the Income Tax Act No. 58 of 1962 ("the Act").
  • Section 12B of the Act allows for deductions in respect of certain machinery, plant, implements, utilities and articles used in farming or production of renewable energy.
  • Section 12L of the Act provides a deduction in respect of energy efficiency savings.
  • Section 12U of the Act provides for additional deductions in respect of road and fences in respect of production of renewable energy.
  • Donations to certain organisations is deductible in terms of section 18A of the Act.

5. Has your country recently announced tax reforms connected to climate change?

Yes, please refer to the carbon tax above.

6. Other comments

N/A

Bernard Mofokeng