Tax incentives
Incentives and privileges under the Renewable Energy Act 2008
The UK government enacted the Renewable Energy (RE) Act in 2008. It aims to promote the development and commercialisation of renewable energy resources, to reduce harmful emissions and achieve improved energy supply and availability. Solar is, of course, a key source of renewable energy.
To help the Act achieve its objectives, a range of incentives (both fiscal and non-fiscal) and other privileges have been made available to investors. This is a brief summary.
Subject to certain conditions, developers of renewable energy projects and activities can enjoy incentives including:
- Income tax holidays
- Duty-free importation of machinery and equipment and related materials
- Real property tax of 1.5% on the original cost, less accumulated normal depreciation or net book value of equipment, machinery and other improvements actually used in the RE facilities
- Preferential corporate income tax rate of 10% on net income after the lapse of the income tax holidays period
- Accelerated depreciation on plant, machinery and equipment used
- Zero-rated value-added tax (VAT) on certain transactions e.g. sale of power generated from renewable sources, purchase of local goods/services needed for the development of the solar power plant
- Tax exemption on sale of carbon credits
Other incentives and privileges are available in the form of tax rebates for tax paid for the purchase of renewable energy components.
