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Carbon Tax Act Regulations Amended

July 9, 2021

National Treasury

Regulations setting out the criteria for carbon tax offsets have been amended.

National treasury published the amended Carbon Tax Act Regulations in Government Gazette 44818.

The Regulations were published in Gazette 42873 on 29 November 2019.

They were drafted in terms of Section 13 of the act.

The section stipulates that taxpayers “must reduce the amount in respect of the carbon tax for which the taxpayer is liable in respect of a tax period by utilising carbon offsets as prescribed by the Minister”.

The Regulations focus on allowance of offset in respect of an approved project against carbon tax liability; offset creation and utilization period; limitation on allowance; designation of administrator; creation of offset registry; maintaining, overseeing of offset registry and access to offset registry; procedure for claiming allowance by taxpayer; duties of administrator for purpose of claiming of allowance by taxpayer and requirements for documents.

Approved projects qualifying for offsets must be undertaken in South Africa on or after 1 June 2019 and involve activities not subject to the carbon tax.

The Regulations came into effect on 1 June 2019.

Amendments include a new definition on “CDM registry” meaning an “electronic database system in which the issuance and distribution of certified emission reductions relating to CDM projects are recorded and maintained by the secretariat established under Article 8 of the Kyoto Protocol to the United Nations Framework Convention on Climate Change”.

A new definition on “certificate of voluntary cancellation” means a “document issued by the CDM, VERRA, Gold Standard or a national registry certifying that a carbon credit has been cancelled for the purpose of being used in the South African carbon tax offset scheme”.

The definition on “attestation of voluntary cancellation” is deleted.

A new subregulation (2) is inserted into Regulation 2 stipulating that an offset must be utilized on or before 28 July 2023 in relation to the first phase of the carbon tax ending on 31 December 2022.

An amendment is introduced to Regulation 4 outlining the sources of renewable energy.

Amendments are also introduced to Regulation 9 replacing reference to “attestation of voluntary cancellation” with “certificate of voluntary cancellation”.

Reference to carbon offsets is also removed from Regulation 13.

Meanwhile, the South African Revenue Service (SARS) has announced the signing of a Memorandum of Understanding with the South African Institute of Chartered Accountants (SAICA) to build capability in SARS.

In a statement, SARS points out that, as part of its process to ensure that it has the requisite skills to fulfil its mandate, it has “reached out to SAICA to assist with recruiting specialists with tax and forensic experience to help capacitate the organisation by mobilising resources from within SAICA’s Chartered Accountancy membership base”.

The collaboration will assist SARS in acquiring skills in areas such as Specialist Auditing, Transfer Pricing, Base Erosion and Profit Shifting, Illicit Economy and High Wealth Individual Unit.