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SBC Tax Rates - Small Business Corporation Tax

10 Mar 2023
Author: Neil Helps

SBC Tax Rates – Small Business Corporation Tax

In the current economic climate in South Africa, businesses need to be aware of the legal tax breaks at their disposal. 

Many small businesses are not aware that they can qualify for Small Business Corporations Tax return, which is lower than the normal Company’s Tax payable at a rate of 27%. This results in many small businesses paying more tax than is necessary reducing corporate income needed to maintain the entity on a going concern basis.

Note that qualifying for the SBC tax rates requires meeting specific requirements.

SARS is improving their systems and non-compliance is a specific area of focus with many now paying penalties and interest for non-compliance therefore having a qualified accountant and registered tax practitioner handle your small business accounting and tax is a wise decision.

Working with an Accountant and Registered Tax Practitioner can ensure that your tax breaks are applied correctly and that your compliance requirements are met on time to avoid penalties and interest. This can save you lots of time and money in the long run.

What are the qualifying criteria for SBC Tax Rates?

An SBC is a close corporation, private company (other than a personal services provider) or personal liability company of which:

  • Natural persons hold the entire shareholding or membership for the entire year of assessment.
  • The gross income does not exceed R20 million during the assessment year.
  • None of the members or shareholders, at any time during the year of assessment, held shares in any other company other than listed companies, collective investment schemes, body corporates, share-block companies, specific associations of persons, friendly societies, less than 5% interest in cooperatives, a venture capital company, shares in inactive private companies with assets of less than R5,000 or had taken steps to liquidate, wind-up or deregister.
  • Not more than 20% of the sum of gross income and capital gains consists of investment income and income from the provision of personal services.
  • If engaged in the provision of personal services, maintains at least three full-time employees (none of whom may be a shareholder or a connected person in relation to the shareholder) for core operations.

SBC Tax Table:

Financial years ending on any date between 1 April 2023 and 31 March 2024

Taxable Income (R) Rate of Tax (R)
1 – 95 750 0% of taxable income
95 751 – 365 000 7% of taxable income above 95 750
365 001 – 550 000 18 848 + 21% of taxable income above 365 000
550 001 and above 57 698 + 27% of the amount above 550 000

Financial years ending on any date between 1 April 2022 and 31 March 2023

Taxable Income (R) Rate of Tax (R)
1 – 91 250 0% of taxable income
91 251 – 365 000 7% of taxable income above 91 250
365 001 – 550 000 19 163 + 21% of taxable income above 365 000
550 001 and above 58 013 + 27% of the amount above 550 000

 

So as can be seen from the Table above, the small business can save a lot in taxes if the correct tax structure is applied.

For example:

Normal Company - Taxable Income R500 000 x 27% = Tax of R135 000

SBC – Taxable Income R500 000 = Tax of R47 198

That is a tax saving of R135 000 – R47 198 = R87 802

If you are unsure whether you qualify please speak to your ZPA Account Manager.

Are you using technology to help streamline the business’ processes in future?

Consult your accountant to make sure your company is using the best software and applications.

This ensures that human error is reduced, data remains safe and accessible by all who need access.

Collaboration between the business and its employees as well as external parties (like accountants and tax practitioners) becomes so easy and efficient.

Xero has now implemented the functionality to submit VAT returns straight from your accounting package.

Do you need a Quote for our Tax and Accounting Services?

Contact our team via any of the following channels to get a proposal for your personal income tax services:

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