Senate Approves Tax Credit for Acquisition and Installation of Solar Systems at Places of Residence
By: July 26, 2024 ,The Full Story
As part of efforts to increase the use of renewables in the country, the Government is providing income-tax credit to individuals who acquire and install a solar photovoltaic system at their primary place of residence.
The Senate, on Friday (July 26), approved the Income Tax (Amendment) Act, 2024, which sets out the appropriate legal framework that will allow individuals to benefit from the income-tax credit.
Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, announced the initiative during his 2023/24 Budget presentation.
Piloting the legislation in the Senate, Minister of Information, Skills and Digital Transformation, Senator Dr. the Hon. Dana Morris Dixon, said it is formalising an important component of the Government’s green policy and increasing renewable energy adoption in the country.
She added that the measure forms part of a much broader goal of reducing the country’s dependence on fossil fuels and substantially increasing the share of renewable energy in Jamaica’s energy mix.
Senator Morris Dixon pointed out that approximately 600 persons will benefit per year from the tax relief, totalling approximately $100 million in tax revenue.
The Minister said Jamaica has set a target to achieve a 50 per cent use of renewable energy in the electricity generation sector by 2030, and that the utilisation of appropriately targeted fiscal measures is critical to achieving this result.
“This is also a matter of economic resilience. The typical economic shock often has its origin in fossil fuels and a conflict that is unrelated to us in some far corner of the globe. This Honourable Senate will recall that in the Budget presentation earlier this year, as a part of the revenue measure for financial 2024/25 Budget, Minister Clarke indicated that the Government will also be reducing the corporate income tax rate for independent power producers producing 75 per cent or more of their energy from renewable sources, from 33 1/3 per cent to 25 per cent,” Dr. Morris Dixon said.
She noted that the objective of this rate reduction is to promote growth within the renewable energy sector by providing a more favourable tax environment and providing more of an incentive for larger-scale investment in renewable energy technologies, such as wind and solar.
She said that the major components utilised in the installation of a solar photovoltaic system, such as the solar photovoltaic panels, solar inverters and solar batteries, including lithium-ion batteries, are also exempt from the payment of General Consumption Tax (GCT).
“These fiscal measures are proof of the Government’s commitment to achieve the target of 50 per cent use of renewables by 2030, and the Government will continue to explore measures, fiscal and otherwise, to ensure that this target is met. This includes ongoing dialogue with industry stakeholders, continuous assessments of global best practices and adapting our policies to ensure that Jamaica remains at the forefront of renewable adaptation,” Dr. Morris Dixon noted.
She said adaptation of the solar photovoltaic system at residential levels will lead to substantial savings on electricity bills for citizens.
“By reducing energy costs, we can improve the quality of life for Jamaicans and increase disposable income, which in turn stimulates other sectors of the economy. This can lead to the establishment of new industries providing high-quality jobs and enhancing our technical capabilities,” she said.
Senator Morris Dixon added, too, that the HEART/NSTA Trust offers a solar energy systems installation course.
“Not only is the Government clearing the way for Jamaicans to purchase these systems but we are also ensuring that skilled labour is present to instal and maintain them,” she noted.
She reiterated the Government’s commitment to ensuring the benefits of renewable energy are accessible to all Jamaicans.
“This includes working on initiatives like this one to support low-income and middle-income households in acquiring and installing solar systems, ensuring that the transition to renewable energy is inclusive and equitable,” she said.
In supporting the legislation, Opposition Senator, Sophia Fraser Binns, suggested that businesses, particularly small businesses, should also be able to benefit from the programme.
The Bill sets out the criteria that will enable individuals who have installed a solar photovoltaic system at their primary residence to benefit from the income-tax credit.
In addition, the Bill makes provisions for, among other things, an income-tax credit at the rate of 30 per cent of the acquisition and installation cost of the solar photovoltaic system for the taxpayer’s primary residence, up to a maximum cost of $4 million.
“What we are saying is that the maximum credit an individual will be allowed to claim is $1.2 million. This measure shall apply to solar photovoltaic systems acquired and installed on or after January 1, 2023 [that is] for the year of assessment 2023. The value of the income-tax credit will be applied to the acquisition/installation price of the solar photovoltaic system and will be claimable in the year the system is installed,” Senator Morris Dixon said.
“The income-tax credit will be used by the taxpayer to offset their total income-tax liability equal to the total value of the credit received. The credit would be non-refundable, that is, if the total value of the credit exceeds the total taxpayer’s liability, the taxpayer would not receive a cash refund. A carry-forward provision is included to allow the individual to apply the unused portion of the credit to future tax years,” Dr. Morris Dixon said.
The amount of credit applied would be restricted to a maximum of 50 per cent of income tax payable by the taxpayer in the assessed year, with the remaining amount being carried forward and applied to the future tax year.
In order to claim the credit, the taxpayer will have to provide proof, such as invoices and independent verification. that the solar photovoltaic system is installed and is generating electricity.
The Bill [also] seeks to amend the income tax prescribed form order 2015, to prescribe new taxpayer return forms to facilitate the tax credit in the relevant forms.
Taxpayers are only qualified once to benefit from the initiative.