The final step in the legislative process for implementing the carbon tax has been completed, and the carbon tax legislation has an effective date of 1 June 2019.
The Carbon Tax Act No. 15 of 2019 is “to provide for the imposition of a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions.”
The aim of the carbon tax is to address carbon emissions, and the carbon tax imposes an initial levy of R120 per ton of carbon dioxide-equivalent (CO2e) of greenhouse gas emissions above a threshold of tax-free allowances (the allowances could reduce the initial rate to as low as R6 - R48 per ton of CO2e).
The South African Revenue Service has issued various draft documents and forms regarding the administration of the carbon tax for public comment. Payment of the tax and submission of the carbon tax return for the first tax period (1 June 2019 to 31 December 2019) have been delayed until July 2020. Read TaxNewsFlash
Although the carbon tax is relatively simple in structure, its implementation may be challenging for many entities. The carbon tax is based on fossil fuel consumption, industrial process emissions as well as fugitive emissions—all of which are not regularly or consistently measured by many in corporate South Africa. The true financial implications of the tax may be unclear for many companies, given that regulations have not yet been issued regarding the application of key allowances.
The uncertainly is compounded in that, although the legislation sets out how the tax will be managed for phase 1 of the regime, many companies have unanswered questions regarding the financial impact of the tax for phase 2. Therefore, companies may need to consider the implementation of any mitigation measures to minimize the impact of the carbon tax during phase 1, since the mechanics of phase 2 are still undefined.
Read a May 2019 report [PDF 81 KB] prepared by the KPMG member firm in South Africa
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