This article follows on from a previously published article of January 2020 with newly published info from SARS Carbon Tax Act Roadshow of August 2020.
This article focuses on the fact that the Carbon Tax Annual Return is due as from 01 October 2020 for the 2019 tax period and must be completed before 15:00 on 31 October 2020.
The initial tax period and accounting period ran from 01 June 2019 to 31 December 2019 in the first year and 1 January to 31 December in subsequent years.
Carbon Tax Returns
Carbon Tax returns are completed on a DA180 form. Annexures and supporting documents must be submitted via the SARS eFiling platform through the “Excise Levies & Duties” option.
Companies are advised to submit your account as soon as possible from the 1 October 2020 to allow time for seeking advise or guidance on issues that may arise. Last day submission is a choice but may result in interest payable or penalties if then late submitted.
It should be noted that interest on late payments is calculated on a monthly basis wherein one day is regarded as a whole month.
Every licensee must calculate the amount of environmental levy payable for each tax period in respect of its licensed customs and excise manufacturing warehouse in the manner specified.
The DA180 form comes with six annexures and completion notes:
DA180.01A.1 – Fuel Combustion (Stationary)
DA180.01A.2 – Fuel Combustion (Non-Stationary)
DA180.01B.1 – Fugitive (Oil and Natural Gas)
DA180.01B.2 – Fugitive (Coal Mining and Handling)
DA180.01C – Industrial Process
DA180.02 – Carbon Tax Allowances
Completion notes to DA180 carbon tax account
Calculation of the amount of environmental levy payable
In the case of an emissions declaration in terms of section 4(1) of the Carbon Tax Act, the carbon tax account will appear with pre-populated emission values from DEFF – Department of Environment, Forestry and Fisheries (only if 3rd party data was made available to SARS). The taxpayer must either accept these values as correct or may submit different values.
In the case of an emissions declaration in terms of section 4(2) of the Carbon Tax Act, the carbon tax account will generate the necessary annexure(s) for completion by the taxpayer to calculate the emission values in accordance with the formulas prescribed in that section.
The allowances that reduce the emissions must be determined where relevant in accordance with Part 6 of Schedule No. 6 and Part II and Part III of the Carbon Tax Act.
The rate of environmental levy must be determined in accordance with Section F of
Part 3 of Schedule No. 1 and section 5 of the Carbon Tax Act.
The amount of environmental levy payable must be determined in accordance with
Section F of Part 3 of Schedule No. 1 and section 6 of the Carbon Tax Act
Basic tax-free allowance
A taxpayer that conducts an activity that is listed in Schedule 2 of Carbon Tax Act in the column ‘Activity/Sector’ must receive an allowance in respect of those emissions, determined in the following paragraph.
The percentage of the allowance referred to above 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.
Allowance for industrial process emissions
A taxpayer that conducts an activity in respect of industrial process emissions that is listed in Schedule 2 in the column ‘‘Activity/Sector’’ must receive an allowance in respect of those emissions, determined below.
The percentage of the allowance referred to above must be 10 percent of the total greenhouse gas emissions in respect of a tax period in respect of that activity.
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.
Trade exposure allowance
A taxpayer that is liable for the carbon tax in respect of greenhouse gas emissions
must receive an allowance up to a maximum of ten per cent in respect of trade
exposure as measured by value of exports plus imports divided by the total
production by sector or sub-sector that must be determined in a manner prescribed
by the Minister in the regulations accessible in the Section “Trade Exposure Allowance”.
A taxpayer that has implemented measures to reduce the greenhouse gas emissions of that taxpayer in respect of a tax period must receive an allowance in respect of that tax period not exceeding five per cent of the total greenhouse gas emissions of that taxpayer during that tax period, determined in accordance with the formula:
Z = (A/ B – C) x D
‘‘Z’’ represents the percentage to be determined that must not be less than zero;
‘‘A’’ represents: the sector or sub-sector greenhouse gas emissions intensity benchmark as prescribed by the Minister in the regulations;
where no value is prescribed as required above, the number zero;
‘‘B’’ represents the measured and verified greenhouse gas emissions intensity of a taxpayer in respect of a tax period;
‘‘C’’ represents the number one; and
‘‘D’’ represents the number 100.
Carbon budget allowance
(1) Subject to (2) below, a taxpayer that conducts an activity that is listed in Schedule 2 in the column ‘‘Activity/Sector’’, and participates in the carbon budget system during or before the tax period, must receive an additional allowance of five percent of the total greenhouse gas emissions in respect of a tax period.
(2) A taxpayer must only receive the allowance as contemplated in (1) above if the Department of Environment, Forestry and Fisheries confirms in writing that that taxpayer is participating in the carbon budget system as referred to in (1) above.
(1) Subject to (2) below, a taxpayer may reduce the amount in respect of the carbon tax for
which the taxpayer is liable in respect of a tax period by utilising carbon offsets as prescribed by the Minister in the regulations accessible at the link
(2) The reduction of the liability for the carbon tax allowed in terms of (1) above must not exceed so much of the percentage of the total greenhouse gas emissions of a taxpayer in respect of a tax period as is determined by matching the line in the column ‘‘Activity/Sector’’ with the percentage in the corresponding line of the column ‘‘Offsets allowance %’’ in Schedule 2.
Limitation of sum of allowances
A taxpayer, other than a taxpayer in respect of which the maximum total allowance
stipulated Schedule 2 constitutes 100 per cent, must only receive the sum of
the allowances contemplated in 1- 7 above in respect of a tax period to the extent
that the sum of those allowances does not exceed 95 per cent of the total
greenhouse gas emissions of that taxpayer in respect of that tax period as
determined in terms of the column ‘‘Maximum total allowances %’’ in Schedule 2.
Carbon Tax Audit Requirements
Types of Audits
The Department of Environment, Forestry and Fisheries is mandated to verify the correctness of emissions data provided and will be responsible for auditing this information.
This will take place prior to the period of submission to SARS for carbon tax purposes.
The next step in the verification value chain will be an audit function performed by SARS Excise Audit which is an important requirement to ensure the correctness of the declarations and payments made as well as allowances claimed.
There are two types of audits that will be performed: Desk Audits and Compliance Audits
A desk audit is performed by the excise auditor on the submitted DA180/EXD180 account:
To verify and confirm the mathematical correctness of the calculations made by the licensed entity as it pertains to the rebates claimed per the schedule 2 allowances provisions,
To verify and confirm the correctness of all other deductions made as provided for in the Carbon Tax Act, 2019,
To request and verify the supporting documents required for the purposes of allowances, deductions and other information declared.
To verify the final calculation of the total levy due.
In most cases to qualify for an allowance or deduction the licensed entity, must be in possession of an original certificate, official letter or document that permits such allowance or deduction and will be required to submit a copy of the original certificate, letter or document for audit purposes.
These audits will be conducted at the premises of the taxpayer during which the excise auditor will perform on-site verification of the supporting systems, documentation and procedures deployed by the licensed entity which informed the emission equivalents declared:
To verify and confirm the integrity of the declared emission equivalents and the levy payment on the submitted excise account as it is reflected on the entity’s system, documentation and processes.
The licensed entity will always be informed prior to the performing of such audits. This will be by means of a letter requesting the availability of the emission facility documentation, systems, procedures and for the presence of a senior official representing the License Entity will be issued to the licence entity.
In determining Carbon Tax outcomes it is advisable that companies and individuals utilise the services of professionally qualified tax practitioners to deal with such complex matters.
Author Craig Tonkin