Small Business Tax in South Africa

While majority of RSA (South African) businesses will be eligible for Tax submissions, a percentage may find themselves in a bracket that may differentiate themselves from the rest. Should you have a small business in South Africa, with a turnover of less than 20 million per annum, you may qualify as a Small Business Corporation (SBC) and save on your Taxes.

In this post we cover the main questions and information every SA Entrepreneur or Small Businesses need to know about Small Business Corporations Tax and its benefits. 

What are the requirements to qualify as a SBC?

In order to qualify a a Small Business Corporation with SARS, a company has to meet the below specific criteria as stipulated in the Income Tax Act (ITA) of South Africa:

• All Shareholders should be natural persons. Meaning they hold no shares within another company or entity.
• Shareholder or members may not have any affiliation to any other entity.
• The gross income for the financial year may not exceed 20 million rand.
• Not more than 20% of the gross income may consist of  Investment income and income from rendering personal services.

Once a business complies with the above requirements, they are able to apply as a Small Business Corporation with SARS and may qualify for favorable tax treatment.

What Type of entities may qualify as an SBC?

The type of entities that may qualify for Small Business Tax, should the meet the previously mentioned list of requirements to qualify as an SBC, are as follows:

• Close corporation
• Co-operative
• Private Company
• Personal liability company

This is however not limited to and includes other entities such as Trusts, provided that the beneficiaries of the trust are all natural persons and hold the rights to the shares or the members interest throughout the Tax Assessment year.

Not sure if your business qualifies as an SBC? Click HERE to book your Tax Consultation with our SBC Tax Expert now.

What are the main benefits of Small Business Tax?

Most companies may find themselves subjected to paying a rate of 28% for Corporate Income Tax. Whilst Small Business Corporations are graced with more favorable tax rates on taxable Income up to R550 000.

See below example of SBC Tax Rates for SBC’s with a financial year ending between 1 April 2021 and 31 March 2022:

To view the current SBC Tax rates at SARS – click here.

Companies who qualify as SBCs, may also qualify for Accelerated Depreciated Allowance.

This benefit will primarily benefit companies who own assets that depreciate over time such as plant or  machinery used in manufacturing.

As a assets that depreciates in value, companies are able to claim back a percentage of the value over a period of time:

• 50% of the cost of the asset in the first year of assessment during which the asset is first used;
• 30% of the cost in the second year;
• 20% in the third year.

The value of these depreciations can be deducted from the annual taxable income as an expense, which will allow the company to pay less tax.

Want to ensure you get the Tax benefits your company is entitled to?

Click HERE to book your Tax Consultation for Small Business Corporations today!

As complex as Small Business Tax may be, medium to large enterprise taxes are just as complicated, thus it is advised that you get a Tax Specialist to guide you and ensure that you are tax smart, and save on taxes where legally eligible.

Let our Tax Experts help your Company save on Tax today!