9. Allowance in respect of fugitive emissions
A taxpayer that conducts an activity that is listed in Schedule 2 in the column “Activity/Sector” must receive an allowance in respect of fugitive emissions equal to 10 per cent of the total greenhouse gas emissions in respect of the tax period in respect of that activity.
[Section 9 substituted by section 96(1) of Act 34 of 2019 deemed effective on 1 June, 2019]
8. Allowance for industrial process emissions
(1) A taxpayer that conducts an activity in respect of industrial process emissions that is listed in Schedule 2 in the column “Activity of Sector” must receive an allowance in respect of those emissions, determined in terms of subsection (2).
(2) The percentage of the allowance referred to in subsection (1) must be 10 per cent of the total greenhouse gas emissions in respect of a tax period in respect of that activity.
[Subsection (2) substituted by section 95(1) of Act 34 of 2019 deemed effective on 1 June, 2019]
Part II
Allowances
7. Basic tax-free allowance
(1) A taxpayer that conducts an activity that is listed in Schedule 2 in the column “Activity/Sector” must receive an allowance in respect of those emissions, determined in terms of subsection (2).
(2) The percentage of the allowance referred to in subsection (1) must be calculated by matching the line in which the activity is contained in the column “Activity/Sector” with the corresponding line in the column “Basic tax-free allowance %” in Schedule 2 of the total percentage of greenhouse gas emissions in respect of a tax period in respect of that activity.
[Section 7 substituted by section 94(1) of Act 34 of 2019 deemed effective on 1 June, 2019]
6. Calculation of amount of tax payable
(1) Subject to subsections (2) and (3), the amount of tax payable by a taxpayer in respect of a tax period must be calculated in accordance with the formula-
X = <{[(E – S) x (1 – C)]-[D x (1-M)]} + {P x (1 – J)} + {F x (1 – K)}> x R
in which formula-
(a) “X” represents the amount to be determined that must not be less than zero;
(b) “E” represents the number in respect of the total fuel combustion related greenhouse gas emissions of the taxpayer in respect of that tax period expressed as a carbon dioxide equivalent determined in terms of section 4(1) or (2)(a);
(c) “S” represent an amount equal to the quantity of renewable electricity (kWh) purchased under a power purchase agreement multiplied by the renewable energy premium determined by the Minister by notice in the Gazette in respect of a tax period, until 31 December 2022; and
[Paragraph (c) substituted by section 63(1)(a) of Act 20 of 2021 deemed effective on 1 January 2021. EDITORS NOTE: Act 20 of 2021 as published states begins paragraph (c) with the words “”B” represent…” – since there is no “B” in the formula, it appears that “S” is the correct reference]
(d) “C” represents a number equal to the sum of the percentages of allowances determined under sections 7, 10, 11, 12, and 13 in respect of that tax period, subject to section 14;
(e) “D” represents the number in respect of the petrol and diesel related greenhouse gas emissions of that taxpayer in respect of that tax period expressed as a carbon dioxide equivalent, determined in terms of section 4(1) or (2)(a);
(f) “M” represents a number equal to the sum of the percentages of the allowances determined under sections 7, 12 and 13 in respect of that tax period, subject to section 14;
(g) “P” represents the number in respect of the total industrial process related greenhouse gas emissions of the taxpayer in respect of that tax period expressed as a carbon dioxide equivalent determined in terms of section 4(1) or (2)(c);
(h) “J” represents a number equal to the sum of the percentages of the allowances determined under sections 7, 8, 10, 11, 12 and 13 in respect of that tax period, subject to section 14;
[Paragraph (h) substituted by section 93(1) of Act 34 of 2019 deemed effective on 1 June, 2019]
(i) “F” represents the number in respect of the total fugitive greenhouse gas emissions of the taxpayer in respect of that tax period expressed as a carbon dioxide equivalent determined in terms of section 4(1) or (2)(b);
(j) “K” represents the sum of the percentages of the allowances determined in terms of sections 7, 9, 10, 11, 12 and 13 in respect of that tax period, subject to section 14; and
(k) “R” represents the rate of tax prescribed under section 5:
Provided that where the number in respect of the determination of the expression “(E-S)” in the formula is less than zero, that number must be deemed to be zero.
[Subsection (1) amended by section 77(1)(a) of Act 2 of 2020 deemed effective on 1 January, 2020]
(2) The amount of tax payable by a taxpayer in respect of the generation of electricity from fossil fuels conducting activities under the IPCC codes 1A1 for energy industries (including heat and electricity recovery from Waste), 1A2 for manufacturing industries and construction (including heat and electricity recovery from Waste) and 1A4 for other sectors (including heat and electricity recovery from Waste) in respect of a tax period must be calculated in accordance with the formula:
X = A – B – C
in which formula-
(a) “X” represents the amount to be determined that must not be less than zero;
(b) “A” represents the amount of tax payable in respect of a tax period determined in terms of subsection (1);
(c) “B” represents an amount equal to the quantity of renewable electricity (kWh) purchased under a power purchase agreement multiplied by the renewable energy premium determined by the Minister by notice in the Gazette in respect of a tax period, until 31 December 2025; and
[Paragraph (c) substituted by section 63(1)(a) of Act 20 of 2021 and by section 39(1)(b) of Act 20 of 2022 effective on 1 January, 2023]
(d) “C” represents an amount equal to the environmental levy contemplated in respect of electricity generated in the Republic in Section B of Part 3 of Schedule 1 to the Customs and Excise Act, 1964 (Act 91 of 1964), paid in respect of a tax year, until 31 December 2025.
[Subsection (2) amended by section 39(1)(a) of TLA Act of 2022 effective on 1 January, 2023. Paragraph (d) substituted by section 39(1)(c) of Act 20 of 2022 effective on 1 January, 2023]
(3) The amount of tax payable by a taxpayer that is a petroleum refinery in respect of a tax period must be calculated in accordance with the formula-
X = A – (B x P)
in which formula-
(a) “X” represents the amount to be determined that must not be less than zero;
(b) “A” represents the amount of tax payable in respect of a tax period determined in terms of subsection (1);
(c) “B” represents an amount of 0.66 cents per litre;
[Paragraph (c) substituted by section 8(1) of Act 19 of 2022 and by section 9(1) of Act 19 of 2023 deemed effective on 1 January, 2023]
(d) “P” represents the total amount of petrol produced expressed in litres.
[Subsection (3) added by section 77(1)(b) of Act 23 of 2020 deemed effective on 1 January, 2020 – amendment probably supposed to be insertion of subsection (4) – subsection (3) already exists]
(4) For the purposes of this section “sequestrate” means-
(a) the process of storing a greenhouse gas in forestry plantations and harvested wood products within the operational control of the taxpayer in respect of fuel combustion emissions declared in terms of IPCC codes 1A2d for pulp, paper and print and 1A2j for wood and wood products in terms of section 4(1); or
(b) the process of storing a greenhouse gas in forestry plantations and harvested wood products within the operational control of the taxpayer in respect of fuel combustion emissions declared in terms of IPCC codes 1A2d for pulp, paper and print and 1A2j for wood and wood products or increasing the carbon content of a carbon reservoir other than the atmosphere in respect of fuel combustion emissions declared in terms of section 4(2)(a).
[Subsection (4) substituted by section 63(1)(b) of Act 20 of 2021 and by section 39(1)(d) of Act 20 of 2022 deemed effective on 1 January, 2022]
5. Rate of tax
(1) The rate of the carbon tax on greenhouse gas emissions must, subject to subsections (2) and (3), be imposed at an amount of R159 per ton carbon dioxide equivalent of the greenhouse gas emissions of a taxpayer.
[Subsection (1) substituted by section 10(1) of Act 22 of 2020, by section 6(1) of Act 19 of 2021, by section 7(1) of Act 19 of 2022 and by section 8(1) of Act 19 of 2023 deemed effective on 1 January, 2023]
(2) The rate of tax specified in subsection (1) must be increased to the amount of-
(a) R159 for tax periods from 1 January 2023 until 31 December 2023;
(b) R190 for tax periods from 1 January 2024 until 31 December 2024; and
(c) R236 for tax periods from 1 January 2025 until 31 December 2025.
[Subsection (2) substituted by section 92(1) of Act 34 of 2019 and by section 38(1)(a) of Act 20 of 2022 effective on 1 January, 2023]
(2A) The rate of tax specified in subsection (1) must be increased to the amount of R308 for tax periods from 1 January 2026 until 31 December 2026.
[Subsection (2A) inserted by section 38(1)(b) of Act 20 of 2022 effective on 1 January, 2023]
(2B) The rate of tax specified in subsection (1) must be increased to the amount of-
(a) R347 for tax periods from 1 January 2027 until 31 December 2027;
(b) R385 for tax periods from 1 January 2028 until 31 December 2028 and
(c) R424 for tax periods from 1 January 2029 until 31 December 2029.
[Subsection (2B) inserted by section 38(1)(b) of Act 20 of 2022 effective on 1 January, 2023]
(2C) The rate of tax specified in subsection (1) must be increased to the amount of R462 for tax periods from 1 January 2030 until 31 December 2030.
[Subsection (2C) inserted by section 38(1)(b) of Act 20 of 2022 effective on 1 January, 2023]
(3) The rate of tax must be increased after 31 December 2030 by the amount announced by the Minister in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, 1999 (Act 1 of 1999).
[Subsection (3) substituted by section 92(1) of Act 34 of 2019 and by section 38(1)(c) of Act 20 of 2022 effective on 1 January, 2023]
(4) The rate of tax specified in subsection (1) may be adjusted by the amount announced by the Minister in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, 1999, (Act 1 of 1999), in 2025 and thereafter at three-year intervals to take into account the impact of exchange rate movements on the comparability of the rate to global carbon pricing.
[Subsection (4) added by section 38(1)(d) of Act 20 of 2022 effective on 1 January, 2023]
4. Tax base
(1) Notwithstanding subsection (2), the carbon tax must be levied in respect of the sum of the greenhouse gas emissions of a taxpayer in respect of a tax period expressed as the carbon dioxide equivalent of those greenhouse gas emissions resulting from fuel combustion and industrial processes, and fugitive emissions in accordance with an emissions determination methodology approved by the Department of Environmental Affairs.
[Subsection (1) substituted by section 91(1)(a) of Act 34 of 2019 deemed effective on 1 June, 2019]
(2) Where a taxpayer uses an emissions determination methodology in respect of the sum of the greenhouse gas emissions of a taxpayer in respect of a tax period—
(a) employing readily available statistical data on the intensity of processes (Activity data) and emission factors as specified in the “IPCC Guidelines For National Greenhouse Gas Inventories” (2006)); or
(b) employing the statistical data and emission factors as specified in paragraph (a) including country-specific emission factors,
in respect of greenhouse gas emissions resulting from fuel combustion, and industrial processes, and fugitive emissions the carbon tax must be levied in respect of the sum of the greenhouse gas emissions of a taxpayer in respect of a tax period expressed as the carbon dioxide equivalent of those greenhouse gas emissions resulting from-
(a) fuel combustion in respect of that tax period that is a number constituted by the sum of the respective numbers determined for each type of fuel in respect of which a greenhouse gas is emitted in respect of that tax period which respective numbers must be determined in accordance with the formula:
E = (A x B)
in which formula-
(i) “E” represents the number to be determined;
(ii) “A” represents the mass of any one type of the fuel expressed in tonne that is the source of the greenhouse gas emission, other than any fuel utilised for the purposes of international aviation and maritime transport;
(iii) “B” represents the greenhouse gas emission factor in carbon dioxide equivalent per tonne that must be determined in accordance with the formula:
X = {[(C x 1) + (M x 23) + (N x 296)] x D}/Y
in which formula-
(aa) “X” represents the number to be determined;
(bb) “C” represents the carbon dioxide emissions of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 1 of Schedule 1 with the number in the corresponding line of the column “CO2 (KGCO2 of TJ)” of that table;
(cc) “M” represents the methane emissions of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 1 of Schedule 1 with the number in the corresponding line of the column “CH4 (KGCH4 of TJ)” of that table;
(dd) “N” represents the Nitrous Oxide emissions of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 1 of Schedule 1 with the number in the corresponding line of the column “N2O (KGN2O/TJ)” of that table;
[Item (dd) amended by section 91(1)(d) of Act 34 of 2019 deemed effective on 1 June, 2019]
(ee) “D” represents the net default calorific value (terajoule per tonne) of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 1 of Schedule 1 with the number in the corresponding line of the column “DEFAULT CALORIFIC NET VALUE (TJ/TONNE)” of that table;
[Item (ee) amended by section 91(1)(d) of Act 34 of 2019 and substituted by 91(1)(e) of Act 34 of 2019 both deemed effective on 1 June, 2019]
(ff) “Y” represents the number 1000;
[Subparagraph graph (iii) amended by section 91(1)(c) of Act 34 of 2019 deemed effective on 1 June, 2019. Item (ff) added by section 91(1)(d) of Act 34 of 2019 deemed effective on 1 June, 2019]
(b) fugitive emissions that is a number constituted by the sum of the respective numbers determined for each type of commodity, fuel or technology in respect of which the greenhouse gas is emitted in respect of a tax period which respective numbers must be determined in accordance with the formula:
F= (N x Q)
in which formula-
(i) “F” represents the number to be determined;
(ii) “N” represents the mass expressed in tonne in the case of solid fuels or the volume of each type of fuel expressed in cubic metres in the case of fuels other than solid fuels, in respect of the greenhouse gas emission; and
(iii) “Q” represents the greenhouse gas emission factor in carbon dioxide equivalent per tonne or cubic metres—
(aa) in the case of oil and natural gas, that must be determined in accordance with the formula:
X = [(C x 1) + (M x 23) + (N x 296)] x Y
in which formula—
(a) “X” represents the number to be determined;
(b) “C” represents the carbon dioxide emissions of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 2 of Schedule 1 with the number in the corresponding line of the column “CO2” of that table;
(c) “M” represents the methane emissions of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 2 of Schedule 1 with the number in the corresponding line of the column “CH4” of that table;
(d) “N” represents the Nitrous Oxide emissions of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 2 of Schedule 1 with the number in the corresponding line of the column “N2O” of that table;
(e) “Y” represents the number 1000; and
(bb) in the case of coal mining and handling, that must be determined in accordance with the formula:
X = (M x D x 23) x Y
in which formula—
(a) “X” represents the number to be determined;
(b) “M” represents the methane emissions of a fuel type determined by matching the fuel type listed in the column “fuel type” in Table 2 of Schedule 1 with the number in the corresponding line of the column “CH4” of that table;
(c) “D” represents the density factor for coal mining and handling methane emissions (0.67 x 10-6 Gg/m3);
(d) “Y” represents the number 1000; and
[Item (iii) substituted by section 91(1)(f) of Act 34 of 2019 deemed effective on 1 June, 2019]
(c) industrial process in respect of a tax period that is a number constituted by the sum of the respective numbers determined for each type of commodity, fuel or technology in respect of which the greenhouse gas is emitted in respect of that tax period which respective numbers must be determined in accordance with the formula:
P = (G x H)
in which formula-
(i) “P” represents the amount to be determined that must not be less than zero;
(ii) “G” represents the mass of each raw material used or product produced expressed in tonne in respect of which the greenhouse gas is emitted in respect of that tax period; and
(iii) “H” represents the greenhouse gas emission factor in carbon dioxide emissions equivalent per tonne for each raw material used or product produced that must be determined in accordance with the formula:
X = (C x 1) + (M x 23) + (N x 296) + (H x 11 900) + (T x 5 700) + (S x 22 200)
in which formula-
(aa) “X” represents the number to be determined;
(bb) “C” represents the carbon dioxide emissions of a raw material or product determined by matching the fuel type listed in the column “SOURCE CATEGORY ACTIVITY/RAW MATERIAL/PRODUCT” in Table 3 of Schedule 1 with the number in the corresponding line of the column “tonneCO2/tonne product” of that table;
[Item (bb) substituted by section 91(1)(g) of Act 34 of 2019 deemed effective on 1 June, 2019]
(cc) “M” represents the methane emissions of a raw material or product determined by matching the fuel type listed in the column “SOURCE CATEGORY ACTIVITY/RAW MATERIAL/PRODUCT” in Table 3 of Schedule 1 with the number in the corresponding line of the column “tonneCH4/tonne product” of that table;
[Item (cc) substituted by section 91(1)(g) of Act 34 of 2019 deemed effective on 1 June, 2019]
(dd) “N” represents the Nitrous Oxide emissions of a raw material or product determined by matching the fuel type listed in the column “SOURCE CATEGORY ACTIVITY/RAW MATERIAL/PRODUCT” in Table 3 of Schedule 1 with the number in the corresponding line of the column “tonneN2O/ tonne product” of that table;
[Item (dd) substituted by section 91(1)(g) of Act 34 of 2019 deemed effective on 1 June, 2019]
(ee) “H” represents the Hexafluoroethane (C2F6) emissions of a raw material or product determined by matching the fuel type listed in the column “SOURCE CATEGORY ACTIVITY/RAW MATERIAL/PRODUCT” in Table 3 of Schedule 1 with the number in the corresponding line of the column “tonneC2F6/tonne product” of that table;
[Item (ee) substituted by section 91(1)(g) of Act 34 of 2019 deemed effective on 1 June, 2019]
(ff) “T” represents the carbon tetrafluoride (CF4) emissions of a raw material or product determined by matching the fuel type listed in the column “SOURCE CATEGORY ACTIVITY/RAW MATERIAL/PRODUCT” in Table 3 of Schedule 1 with the number in the corresponding line of the column “tonneCF4/tonne product” of that table; and
[Item (ff) substituted by section 91(1)(g) of Act 34 of 2019 deemed effective on 1 June, 2019]
(gg) “Section” represents the Sulphur hexafluoride (SF6) emissions of a raw material or product determined by matching the fuel type listed in the column “SOURCE CATEGORY ACTIVITY/RAW MATERIAL/PRODUCT” in Table 3 of Schedule 1 with the number in the corresponding line of the column “tonneSF6/tonne product” of that table.
[Item (gg) substituted by section 91(1)(g) of Act 34 of 2019 deemed effective on 1 June, 2019]
[Subsection (2) amended by section 91(1)(b) of Act 34 of 2019 deemed effective on 1 June, 2019]
3. Persons subject to tax
A person is-
(a) a taxpayer for the purposes of this Act; and
(b) liable to pay an amount of carbon tax calculated as contemplated in section 6 in respect of a tax period as specified in section 16,
if that person conducts an activity in the Republic, resulting in greenhouse gas emissions, equal to or above the threshold determined by matching the activity listed in the column “Activity/Sector” in Schedule 2 with the number in the corresponding line of the column “Threshold” of that table.
[Section 3 amended by section 90(1) of Act 34 of 2019 deemed effective on 1 June, 2019]
2. Imposition of carbon tax
There must be levied and collected for the benefit of the National Revenue Fund, a tax to be known as the carbon tax.
19. Regulations
The Minister must make regulations in respect of-
(a) the sector or subsectionector greenhouse gas emissions intensity benchmark for the purposes of symbol “A” in section 11(1);
(b) the manner of determining the amount of the trade exposure allowance contemplated in section 10; and
(c) carbon offsets contemplated in section 13 regarding-
(i) the projects or activities in respect of which an offset is generated;
(ii) the limitation on the carbon offset allowance;
(iii) offset duration periods;
(iv) the institution, board or body that must administer the offset allowance;
(v) the powers and responsibilities of the institution, board or body contemplated in subparagraph (iv);
(iv) the procedure that must be followed in claiming the offset allowance;
(vi) the records that must be kept in respect of administering the offset allowance; and
(vii) any other matter necessary for the regulation of the utilisation of the carbon offsets.
Part V
Miscellaneous
18. Reporting
Despite Chapter 6 of the Tax Administration Act, the Commissioner must annually submit to the Minister a report, in the form and manner that the Minister may prescribe, within six months from the date of submission of environmental levy accounts and payments contemplated in section 17 advising the Minister in respect of that tax period of-
(a) the total amount of greenhouse gas emissions reported in respect of which taxpayers are liable for the carbon tax; and
(b) the amount of carbon tax collected.