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By Charndré Emma Kippie

 

With the introduction of The Carbon Tax Act, in June 2019, South Africa has witnessed a revived interest in its slow offset market. This was a great step towards reducing emissions. However, we need to make sure that the best projects are invested in, and are delivered at scale.

The Carbon Tax Act (CBT) is administered and collected by SARS. The CBT is assessed, collected and enforced as an environmental levy in terms of the Customs and Excise Act, 1964, read with the relevant provisions of the Carbon Tax Act, 2019. 

Here’s what you need to know about carbon tax in South Africa, and how it affects your business. 

 

Carbon Finance in Africa Matters

Carbon finance could potentially be the ‘golden ticket’ for South Africa, Africa at large, and its investors. This financial stream presents a way to stimulate new development initiatives and renewable energy projects, while securing financial benefits and successfully responding to climate change. 

The African continent finds itself in a favourable position to benefit from investment opportunities linked to carbon finance. It possesses abundant natural resources suitable for sustainable energy production. The lack of existing energy infrastructure, particularly in Sub-Saharan Africa, makes it possible to leapfrog the emission-intensive stage of economic development to clean technologies.

The Carbon Tax Act has made sure that the “polluter-pays” principle comes into effect for large emitters. This assists in ensuring that firms and consumers are held accountable for the adverse costs (externalities) that will come into play in future production, consumption and investment decisions. Firms are now being incentivised towards adopting cleaner technologies over the next decade and beyond.

The carbon tax, at this early stage, will only apply to scope 1 emitters in the first phase. The first phase began on 1 June 2019, and will continue until 31 December 2022. The second phase will be from 2023 to 2030.

 

Calculating Carbon Tax Liability 

As legislated, those emissions that are subject to being taxed are carefully determined in accordance with either an approved reporting methodology of the Department of Environment, Forestry and Fisheries (DEFF), or the designated formulas in terms of the Carbon Tax Act 2019.  

The first phase, that we currently find ourselves in, has a carbon tax rate of R120 per ton of carbon dioxide equivalent emissions. This rate will increase annually by inflation plus 2% until 2022, and annually by inflation thereafter.

Significant industry-specific tax-free emissions allowances ranging from 60% to 95% will result in a modest nett carbon tax rate ranging from R6 to R48 per ton of carbon dioxide equivalent emissions to provide current emitters time to transition their operations to cleaner technologies through investments in energy efficiency, renewables, and other low-carbon measures. 

 

SA’s Carbon Tax Threshold

Carbon tax is imposed on entities in the country that operate emissions generation facilities at a combined installed capacity equal to or above the carbon tax threshold. 

South African companies are taxed on direct emissions at a rate of R127 per CO² equivalent emitted. This rose to R134 this year, and will escalate at a rate of 10% per annum over the next five years. 

An estimated R2. 5-billion was raised in the 2020/21 tax year. 

*These statistics come as a result of research conducted by the Cova Advisory.

 

How You Can Comply 

In South Africa, anyone conducting tasks or seeing through operations that are resulting in the emission of greenhouse gases above the threshold, will be liable to license each of their facilities. This means registering and licensing each of their emissions generation facilities with SARS as ‘customs and excise manufacturing warehouses’ for environmental levy purposes. 

Carbon tax has an annual tax and accounting period. Every licensee must submit an annual CBT environmental levy account in respect of each licenced facility of that licensee in the month of July of the year following the tax period.   

All licensees must be registered for eFiling as the submission and payment of CBT accounts should be made via eFiling. The following process should be followed:

  • Register on eFiling;
  • Once registered, log on;
  • Click on the Request Declaration button;
  • Insert the warehouse number;
  • Click on continue and the form will be generated.

 

If you are unable to access the SARS eFiling service, you may contact the nearest SARS Excise Branch Office for assistance.  

For more information:

 

SA’s Biggest Contributors To Net CO2 Emissions

  • Energy industries
  • Transport & Logistics sector 
  • Metal industry
  • Other fuel combustion activities
  • Manufacturing & Construction industries

 

 

*Check out the latest edition of the Public Sector Leaders publication here.

For enquiries, regarding being profiled or showcased in the next edition of the Public Sector Leaders publication, please contact National Project Manager, Emlyn Dunn:

Telephone: 086 000 9590 |  Mobile: 072 126 3962 |  e-Mail: emlyn.dunn@topco.co.za