get up to 105% of your investment back in tax savings
Section 12B lets South African taxpayers deduct investments in new solar energy from their taxable income. Independent information on how it works, what it could save you and what to look for in a fund.
Up to 105% assumes a fund geared to 233% and a 45% marginal tax rate. Results depend on your income and the fund.
0112B calculator
what could 12B save you?
An estimate for the 2027 tax year (1 March 2026 to 28 February 2027), using SARS tax tables.
Illustrative and indicative only. Uses SARS 2027 tax tables and the under-65 primary rebate, assumes the full deduction is allowed in this tax year, and excludes fees, distributions and tax on exit. Gearing is total plant cost as a percentage of your investment. Not tax advice.
02Distributions
what happens after year one
Once the plants are running, they sell electricity and the fund pays out distributions. Below is an example of how that can look over ten years, assuming distributions are paid as dividends taxed at 20%.
Illustrative example only. Figures are rounded and indicative.
| Year | Dividend | Tax (20%) | After tax |
|---|---|---|---|
| Total |
Scaled to the investment amount in the calculator above. Based on a typical geared 12B fund profile in the market, rounded, and not a projection or offer for any specific fund. Distributions tend to be lower early on while debt is repaid and higher in later years, so they depend on plant performance and the fund running its full term. Assumes payment as dividends; some structures pay partnership income taxed at your marginal rate instead. Excludes fees, exit value and any tax on exit. Not guaranteed.
Want to see how different providers compare?I'll walk you through how distributions differ by structure.
03About
Brendon Neuhaus, CFA
I've spent 14 years in finance and alternative investments, including at Absa Capital and A.P. Moller-Maersk, and I've helped investors make full and proper use of the tax incentives available to them.
Section 12B has become a crowded market. Funds differ a lot in how they're structured, what they actually pay out and the risks investors take on. I've reviewed the structures, the numbers and the legal documents, and I use that to help investors understand their options and decide what makes sense for them this tax year.
- CFA charterholder
- BSc Hons, Advanced Mathematics of Finance
- 14 years in finance and alternative investments
- Absa Capital, A.P. Moller-Maersk
04How it works
how section 12B works
Section 12B of the Income Tax Act allows a deduction for the cost of new renewable energy assets. Funds pool investors into a partnership so individuals can claim their share.
- 01
You join a partnership
You sign a deed of adherence and become a limited partner before the plants are switched on.
- 02
The fund builds solar
Usually on commercial rooftops, often part-funded with bank debt.
- 03
Plants go live by 28 Feb
Your share of the deduction goes on your ITR12 for the year the plants are first used.
- 04
Power is sold for years
Businesses buy the electricity on long-term contracts. That pays debt, fees, then investors.
- 05
You exit
Through a sale, buyout or wind-up, typically after 5 to 10 years. Exit terms affect your final return.
05Gearing
how a deduction above 100% works
The deduction is based on the cost of the solar plant, not only the cash you put in. When a fund combines investor money with bank debt, it buys more plant, and investors can deduct the full cost.
This only works if investors are genuinely "at risk" for that debt under section 24H. In practice that usually means you accept personal liability for your share of the fund's borrowings until they're repaid. Higher gearing means a bigger deduction and a bigger liability.
06Suitability
who 12B suits
12B is primarily a tax planning tool. It works best when most of the deduction falls in the 45% bracket.
Usually a good fit
- Taxable income comfortably above R1,878,600, where the 45% bracket starts
- A high-income year, for example a bonus, business sale or large capital gain
- Capital you can commit for 5 to 10 years
- Comfortable with a private, illiquid investment
Usually not a fit
- Most of your income falls below the top bracket
- You may need access to the capital within a few years
- You're not comfortable with liability for fund debt
- The main reason to invest is a closing deadline
Not sure whether 12B fits your situation?A short call is usually enough to find out.
07Due diligence
what to check before you invest
Questions worth putting to any 12B fund manager. A good manager will answer them clearly and in writing.
When will the plants go live?
The deduction only applies in the year a plant is first used. Ask for construction timelines and what happens if a plant is delayed past 28 February.
How large is each plant?
Solar up to 1MW qualifies for 100% in year one. Larger plants are deducted 50/30/20 over three years.
Am I liable for fund debt?
Ask how much, for how long, and in what circumstances a lender could call on it.
How are distributions taxed?
Partnership income is taxed at your marginal rate. Some funds plan to convert to a company and pay dividends taxed at 20%. Ask how and when, and request the tax opinion.
What are the total fees?
Establishment, annual management and performance fees, plus any fees paid to related parties that build or operate the plants.
Can the manager buy me out early?
Check for a call option and how its price is calculated. Returns that depend on later years may not materialise if you can be bought out sooner.
What happens on exit?
Disposing of your interest can trigger recoupment of the deduction. Ask who bears that tax and how it is calculated.
Who buys the electricity?
Ask who the offtakers are, how long the contracts run, and what happens if one leaves or defaults.
Already looking at a fund?We can go through these questions together.
08Guides
short guides
Brief explainers on the parts of 12B that are most often misunderstood.
Why your tax bracket matters more than the headline percentage3 min read
A deduction is only worth the rate it saves you. In the 2027 tax year, the 45% bracket starts at R1,878,600 of taxable income.
R1 million invested in a fund geared to 233% gives a deduction of about R2.33 million. To save 45% on all of it, you'd need roughly R4.2 million of taxable income. Below that, part of the deduction saves at 41%, 39% or less.
The calculator shows your blended rate. In many cases a smaller investment gives a better overall result.
Want to know your number?
The 28 February deadline applies to the plants, not to you3 min read
Investing before a fund's closing date is the first step. The deduction itself depends on the plants being brought into use within the tax year, which for 2027 means by 28 February 2027.
Solar projects can be delayed. A plant that goes live in March moves its share of your deduction into the following year. Ask for the status and expected switch-on date of each project, and how the fund manages delays.
Questions about a fund's timeline?
Dividends or partnership income: how returns are taxed4 min read
A partnership is not taxed itself. Its profits flow through to the partners and are taxed at each partner's marginal rate, up to 45%.
Some funds plan to transfer the assets into a company later, so investors receive dividends taxed at 20% instead. Over ten years this can make a meaningful difference, as the distributions section above shows, but it depends on the restructure being tax-neutral. Ask how and when it will happen, and request the supporting tax advice.
Unsure how a fund pays out?
12B and 12BA: what changed2 min read
Section 12BA was a temporary 125% deduction for renewable projects brought into use between March 2023 and February 2025. It has expired. Section 12B is the permanent provision: 100% for solar up to 1MW, and 50/30/20 over three years for larger plants.
Deductions above 100% today come from gearing within the fund, not from a larger allowance.
Seen a fund offering a higher deduction?
09Book a call
book a call to learn more
A free 20-minute call with Brendon. No obligation.
- Your numbers. A realistic estimate of what 12B could save you this tax year.
- An honest view. Including whether 12B suits your situation at all.
- What to look for. The questions that separate a sound fund from a weak one.
Choose a time
Opens the calendar. Takes under a minute.
10Webinar
Tuesday 13 October 2026, 13:00 to 13:45
section 12B explained
A free 30-minute overview of how 12B works, what it saves at different income levels and how to assess a fund, followed by Q&A. Online, with the joining link sent by email.
Prefer to talk sooner?
11FAQ
frequently asked questions
Who can invest in a 12B fund?
Individuals, trusts and companies can usually invest. The saving depends on the investor's tax rate: companies pay 27%, so the outcome differs from an individual in the 45% bracket.
How do I receive the tax saving?
Through a lower tax liability or a refund when your 2027 return is assessed, or by reducing your provisional tax payments. It is not paid out by the fund.
Is Section 12B recognised by SARS?
Yes. Section 12B is part of the Income Tax Act, and SARS has issued rulings on how it applies to partnerships. The risk lies in how a particular fund is structured and managed, which is why due diligence matters.
How long is my money committed?
Typically 5 to 10 years. Partnership interests are generally not freely transferable, so plan on holding until the fund exits.
How is Ito Capital paid?
Ito Capital introduces investors to 12B funds and may receive a fee from the fund. This is always disclosed before you invest.
Have a question that isn't covered here?Brendon is happy to talk it through.