How much does section 12B save a small business on solar in 2026?

Answer first: Section 12B turns a business solar system into two savings streams. The first is the electricity bill. The second is tax: 100% of the system’s cost comes off taxable income in the year it starts working. At the 27% company rate that is 27 c back on every rand spent, in year one. Plan the commissioning date, keep the paperwork, and the payback on a commercial roof drops sharply. Related: solar tax rebates · solar for small businesses · commercial solar ROI.

What the law allows in 2026

Section 12B(1)(h) of the Income Tax Act gives a capital allowance on machinery and plant used in a business to generate electricity from renewable sources. For photovoltaic solar the rates are (SARS guide IT39 on renewable-energy allowances; SARS Tax Guide for Small Businesses):

The enhanced 125% deduction under section 12BA covered assets first used between 1 March 2023 and 28 February 2025 and was not extended. Any system commissioned today is claimed under section 12B at 100%.

The five conditions SARS checks

1. Ownership. The business owns the asset or buys it under an instalment credit agreement. A rented or subscription system belongs to the provider; the business deducts the monthly fee as an expense instead.
2. First use by this taxpayer. The system must be brought into use for the first time by the business claiming it.
3. Used in the trade. The electricity feeds the business’s own operations — a shop, workshop, office, farm or factory.
4. Used to generate electricity. Panels, mounting structures, foundations, DC combiners, cabling and inverters all qualify as part of the generating system.
5. Cost. The deductible amount is the lesser of the actual cost and the arm’s-length cash price, including installation and supporting structures.

Batteries: integral or not?

SARS’s IT39 guide treats storage on its own as storage, not generation: batteries that only draw from the grid and store power do not qualify. When a battery forms an integral part of a system that generates electricity, its cost can be deductible with the rest of the system (SARS guide IT39 on renewable-energy allowances). A hybrid system whose battery is charged by the business’s own panels and discharged into its own loads is the textbook integral case. A standalone grid-charged UPS bank is the textbook exclusion. Keep the single-line diagram and the commissioning report that show the battery is charged by the PV system.

Worked example: a R300 000 shop or workshop system

A company installs a 30 kWp hybrid system with 30 kWh of usable LiFePO₄ storage for R300 000 excl. VAT, commissioned in its current financial year.

A VAT vendor also claims the R45 000 input VAT on the invoice, so the VAT never becomes a cost. The after-tax price is what you divide by the yearly electricity saving to find payback. If the system saves R5 000 a month — R60 000 a year — payback on the R219 000 after-tax cost lands at about 3.7 years, against 5 years on the pre-tax price. The tax line alone pulls payback forward by more than a year.

Sole proprietors and partners claim the same deduction against their own taxable income at their marginal rate. Small business corporations have their own rate table; the section 12B deduction still applies to qualifying PV.

Timing is worth real money

SARS does not apportion the deduction for part of a year: a system first used on the last day of the financial year earns the full deduction in that year. It must be claimed in the year of first use and cannot be postponed (SARS guide IT39 on renewable-energy allowances). A company with a February year-end that commissions in February claims a year earlier than one that commissions in March. Plan the installation date with your accountant.

“Brought into use” means working as intended, not ordered or paid for. The evidence trail that proves the date:

• the electrical certificate of compliance — solar CoC explained;
• the installer’s written confirmation of the commissioning date;
• inverter monitoring data showing first generation;
• the invoice, contract and proof of payment;
• municipal or Eskom SSEG approval where the system is grid-tied — commercial SSEG steps.

Recoupment when you sell

When a business sells or disposes of a system it has written off, the proceeds up to the amount deducted are recouped and taxed. Selling the building with the solar system included means allocating part of the price to the PV assets. Factor that into any property sale and keep the asset register updated.

Electricity savings come first, tax second

The deduction is a bonus on a system that already saves money. Commercial tariffs in 2026/27 rose by 8.76% for Eskom direct customers and around 9% in the metros (NERSA media statement (March 2026)). Business tariffs reward daytime self-consumption because shops, offices and workshops use power while the sun shines. Eskom’s revenue filing puts the 2026/27 Businessrate average at 319.77 c/kWh excl. VAT (Eskom FY2027 revenue-recovery table filed with NERSA (Annexure B)). Every kWh the roof supplies at 11:00 is a kWh you do not buy at that price.

Time-of-use businesses earn more from batteries: on Megaflex a stored kWh released in the weekday peak avoids up to 739 c excl. VAT in winter — Megaflex battery arbitrage.

Buy, finance or subscribe — the tax view

• Cash purchase: full section 12B deduction in year one; the strongest tax result.
• Instalment credit agreement or bank loan: the business owns the asset, so section 12B still applies, and interest is deductible as a business expense.
• Rental, lease or power purchase agreement: the provider owns the system and claims the allowance; the business deducts its monthly payments as operating expenses. Compare the after-tax cost of each route over ten years.

Standard Bank’s business solar finance is published at a personalised rate linked to prime + 2.5% over 60 months, with prime at 10.75% since 25 September 2026 (SolarGuide bank comparison (checked 21 Oct 2026); Absa financial indices).

Buying the hardware

Section 12B rewards a system that works for its full life. Specify tier-one panels, an NRS 097-approved inverter and a battery with a throughput warranty in MWh. Ask installers which wholesaler supplies the kit and who handles warranty swaps: ACDC Dynamics, Voltex, ARB, Herholdts, DBS Energy and SONAH Group all supply commercial installers, and a local RMA path keeps downtime — and lost savings — short. See trusted wholesalers and NRS-approved inverters.

Bottom line

Section 12B gives a business 100% of the cost of PV up to 1 MW as a deduction in the year of first use — R81 000 back on a R300 000 system for a company. Own the system, commission it before year-end, keep the CoC and commissioning evidence, and include the battery only when it is charged by your panels. Then let the tariff increases do the rest.

This is general tax information, not tax advice. Confirm your position with a registered tax practitioner.

Quick questions

Is section 12B still available in 2026?

Yes. Section 12B allows 100% of the cost of a photovoltaic system not exceeding 1 MW in the year it is first brought into use for trade. The enhanced 125% deduction under section 12BA applied only to assets first used between 1 March 2023 and 28 February 2025.

Can I claim my solar battery under section 12B?

Only when the battery forms an integral part of a system that generates electricity. SARS’s IT39 guide states that storage which only draws and stores grid power does not qualify.

Can a homeowner claim section 12B?

No. The asset must be used in the taxpayer’s trade. Private households have no current solar tax rebate; the 2023/24 rooftop panel rebate has ended.

Does it matter when in the year the system starts working?

Yes. The deduction is not apportioned for part of a year and must be claimed in the year the system is first brought into use, so commissioning one month before year-end brings the whole deduction forward by a year.