By Garyn Rapson, Partner at Webber Wentzel

Last week the Minister of Finance introduced the revised Carbon Tax Bill (Bill) to Parliament. The Bill takes into account feedback received during the Parliamentary hearings on the December 2017 draft Bill that took place earlier this year. The Bill aims to give effect to South Africa's objectives and commitments to reduce greenhouse gas (GHG) emissions under the National Climate Change Response Policy and the Paris Agreement, respectively.

Carbon Tax - take home points

• after more than eight years in the making, the carbon tax is expected to take effect on 1 June 2019;
   
• the carbon tax will be implemented in a phased approach with the first phase running until 31 December 2022 and the second phase from 2023 to 2030.  According to National Treasury, the introduction of the carbon tax in the first phase is not expected to have an impact on the price of electricity;
   
• a person (which includes a partnership, a trust, a municipal entity and a public entity) who conducts any of the activities listed under Schedule 2 of the Bill is liable to pay carbon tax on GHG emissions which exceed the prescribed thresholds for those activities.  A range of activities in sectors including Energy, Industrial Processing and Waste are listed;
   
• the rate of carbon tax on GHG emissions will be imposed at an amount of ZAR120 per ton carbon dioxide equivalent of the GHG emissions.  This rate must, however, be increased each year by the amount of consumer price inflation (CPI) plus 2% up to 31 December 2022, and adjustments in line with inflation thereafter;
   
• the Bill provides for various tax-free "allowances", which enable a reduction in carbon tax liability of up to 95% for certain activities.  These allowances provide a large degree of flexibility for taxpayers to significantly reduce their carbon tax liability; and
   
• taxpayers must submit environmental levy accounts and payments as prescribed in terms of the Customs and Excise Act, 1964 on an annual basis for every tax period.

You are encouraged to take steps now to understand your company's impending carbon tax liability and how this liability can be minimised.

Draft Carbon Offset Regulations - published for comment on 12 November 2018 (Regulations)

The Regulations govern the carbon offset allowance mechanism that is provided in terms of the Bill.  This mechanism enables companies to reduce their carbon tax liability by investing in GHG emission reduction projects.

We expect that these Regulations will be published in final form on 1 June 2019 to coincide with the commencement of the carbon tax.

Comments on the Regulations are to be submitted by 14 December 2018.