The Carbon Tax Act came into force on 1 June 2019.

The first tax returns and payments for effected taxpayers will be due July 2020. This return would cover the period 1 June 2019 to 31 December 2019; subsequent periods will run from 1 January to 31 December. Form DA180 would need to be submitted in respect of each licensed emission generation facility.

Companies who are considered to operate emission generation facilities are required to register in terms of the Customs and Excise Act as a taxpayer through local SARS offices.

Primary emitters of carbon dioxide and other greenhouse gasses are taxed. In simple terms, if your business activity directly emits greenhouse gasses you will be taxed per carbon ton equivalent. Even companies not meeting the thresholds in terms of the Carbon Tax Act are required to submit returns.

The Carbon Tax Act governs Phase One out of likely three phases of implementation of carbon taxes. Phase One is effective until 31 December 2022.

Phase One will levy carbon tax based on an annual reporting system, per calculated ton of carbon dioxide equivalent (other greenhouse gasses are converted to carbon dioxide equivalents). The Carbon Tax Act provides for a base amount of R120 per carbon ton equivalent, less certain allowances. Allowances are categorized under fossil fuel combustion allowance, industrial process emissions allowance, fugitive emissions allowance, trade exposure allowance, performance allowance, carbon budget allowance and offset allowance.

Phase One targets certain industries and business activities - in essence only direct emitters of gasses are taxed during the first phase. Phase Two is likely to start taxing indirect emissions, for example, the purchase of energy consumed. Phase Three is likely to start including the supply chain activity and is likely to impact on all business activities.

The carbon dioxide equivalent is determined by formulas contained within the Carbon Tax Act, it is based on determined conversions of carbon dioxide and other greenhouse gas emissions.

The carbon tax will apply to direct emissions in the following categories as specified in the National Greenhouse Gas Emission Reporting Regulations:

• Fuel combustion, which relates to emissions released from fuel combustion activities;
• Fugitive emissions from fuels, which relates to emissions mainly released from the extraction, production, processing, and distribution of fossil fuels; and
• Industrial processes emissions, which relates to emissions released from the consumption of carbonates and the use of fuels as feedstocks or as carbon reductants, and the emission of synthetic gases in particular cases.

Please contact your local PKF office in order to establish whether your activities qualify for reporting, or qualify you as a taxpayer for purposes of carbon tax.