President Cyril Ramaphosa, on Tuesday night, announced a three-month delay in first carbon tax payments as part of an extensive set of financial measures worth R500 billion to help companies deal with the COVID-19 pandemic.
Where the payment deadline was originally set to be 31 July 2020, this has now been postponed to 31 October 2020. This is beneficial as it relieves the administrative pressure on companies as well as on administrators including the South African Revenue Service (SARS) and departments governing underlying regulations.
Carbon tax liable entities must go through a series of activities before they can submit their carbon tax environmental levy account, including the submission of their mandatory greenhouse gas emission report to the Department of Environment, Forestry and Fisheries; licencing their emissions generating facilities as customs and excise manufacturing warehouses for environmental levy purposes; and register for carbon tax on eFiling, if not already done so.
During the past few weeks, the greenhouse gas emission reporting deadline has been postponed to 30 April and 31 May for manual and online submissions respectively, so the postponement in carbon tax payment will provide for time to allow timely licencing of facilities and registration as carbon tax liable entities.
Furthermore, certain carbon tax allowances that are meant to cushion the immediate impact of the carbon tax, are still not operational. The trade exposure allowance and benchmarking regulations have been out for public comment and have yet to be finalised. It is to the advantage of entities liable to the carbon tax, that these regulations are finalised before the submission deadline of the carbon tax account.
Another unique relief measure, the carbon offset allowance, although gazetted, is also not yet operational because the ‘Carbon Offset Administration System’ (COAS) – the electronic infrastructure that allows for the listing, transfer and surrender of offsets against carbon tax liability – is not yet in place. Without this system, companies cannot use the offsets as an allowance in their 2020 carbon tax return. The launch of COAS has also been delayed due to the national lockdown instituted across South Africa from 27 March.
Due to the fact that the carbon tax payment deadline has been pushed back, it allows for more time to finalise COAS next month. This should allow more time for carbon tax payers to comply with the stipulated requirements to obtain a so-called “Extended Letter of Approval” (ELoA), and to retire, list, transfer and obtain a Reg 8(e) certificate to claim the allowance against tax liability before 31 October 2020.
What does this mean in practice for emitters?
- 30 April 2020: Submission deadline for 2019 Greenhouse Gas Emission reports for those opting the route of manual submission.
- 31 May 2020: Submission deadline for 2019 Greenhouse Gas Emission reports for those utilising the South African Greenhouse Gas Emission Reporting System (SAGERS).
- 31 October 2020: Payment of first carbon tax environmental levy account for the period 1 June – 31 Dec 2019.
Regarding the use of carbon tax offsets, companies should bear in mind the following timelines should COAS come online before 31 May 2020:
- 31 May 2020: Conclude carbon offset purchase agreement(s) with carbon offset seller.
- 30 June 2020: Apply for the ELoA; retire offsets in international registry; list offsets in COAS.
- 30 September 2020: Transfer offsets to buyer’s COAS account; buyer obtains a certificate in accordance with Regulation 8(e) of the offset regulations.
- 31 October 2020: Deadline to pay carbon tax and surrender offset