We’ve probably all heard it said that small businesses are the backbone of any economy. These businesses often employ the majority of a country’s citizens and provide vital services to their communities. In an effort to encourage the formation of small businesses, the South African Revenue Service (SARS) has granted these entities certain tax breaks. This special tax treatment aims to also alleviate financial pressure on qualifying Small Business Corporations (SBC), making more capital available for possible reinvestment towards growing the company.

What is a Small Business Corporation (SBC)?

To be classified as a Small Business Corporation your company will have to meet several criteria. Most notably, the business's gross income for the year of assessment may not exceed R20 million. Another important criterion is that the entity must be a corporate entity, therefore close corporations, private companies, co-operatives, and personal liability companies could all qualify for the tax break. SARS also stipulates that all of the shareholders in the business have to be natural persons in order to qualify as an SBC. These are only some of the requirements stipulated by SARS, and the safest way to ensure that you qualify is to consult with a tax advisor before filing your tax returns.

What are the Advantages of Small Business Corporation Taxes?

Companies in South Africa are normally subject to a flat tax rate of 28% on their taxable income. Alternatively, if your company qualifies as an SBC, you will enjoy a reduced tax rate if your taxable income is less than R550 000 for the year of assessment. The reduced tax rate is implemented on a sliding scale, providing bigger tax breaks for companies with a lower income.

The following tax table will be applicable for financial years ending between 1 April 2021 and 31 March 2022:

Other Deductions Enjoyed by Small Business Corporations

SBCs also enjoy certain benefits with regards to some of their assets:

• These entities enjoy an increased depreciation rate on their productive assets. This depreciation is seen as an expense, and effectively decreases your taxable income for the year, leading to reduced taxes.
• Owners can claim a 100% deduction of the cost of movable assets that are brought into use for the first time and are used to manufacture goods or similar processes.
• 50% of the cost can be claimed on other qualifying assets if the asset is first brought into use during that year of assessment.

Tax season can be a stressful time for many business owners, and most simply do not have the time to familiarise themselves with all the tax incentives that SARS provides to citizens. Give yourself some peace of mind this year by entrusting your affairs to Booysen Accountants! As experts in taxation, we will help you to identify the deductions that your business qualifies for while ensuring that you meet the relevant requirements. Contact us today on Tel: 012 740 7703, or Email: This email address is being protected from spambots. You need JavaScript enabled to view it. to find out how we can support you.