What is Small Business Corporation Taxes?

Small businesses with an annual turnover of up to R20 million may qualify to pay Income Tax at a reduced tax rate.

A Small Business Corporation (SBC) is a private company that complies with various requirements per the Tax Act.

If it meets the definition of a SBC, it can take advantage of progressive tax tables (as opposed to the fixed standard corporate tax rate) and also accelerated depreciation for certain assets.

The latter means that less tax may be paid in the early years when the assets are purchased.

If you indicate that you are a small business on your Income Tax Return (ITR14), and meet all the requirements, the reduced rates will be applied automatically.

There is no need to apply for the reduced rates because your SBC status will be determined using information on your ITR14.

Is your business viewed as a Small Business Corporation by SARS?

Is your business Turnover less that R20 million per year?

Are the shareholders in your business all natural persons?

Do you only own your one business?

Does less that 20% of your turnover come from “investment” income?

Is less than 20% of your income from rendering a “personal” service?

If you have answered YES to all the above questions your business could be making massive Income Tax savings.

Personal service includes any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draughtsman ship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science, performed personally by any person who holds an interest in the company, close corporation or co-operative, except where such small business corporation employs three or more unconnected full-time employees for core operations throughout the year of assessment.