And the requirements

Small businesses are extremely important to our financial economy and growth. For this reason, SARS has implemented tax benefits for small business corporations, or SBCs. Here are the tax benefits and the requirements you need to meet to qualify as an SBC.

What are the tax benefits for SBCs?

A business that qualifies as an SBC, does not pay income tax on the first R83 000 taxable income per annum. Instead of the flat tax rate of 28%, that all other businesses are required to pay, SBCs pay tax according to a progressive scale. 

·      For income up to R83 000, SBCs pay 0% income tax.

·      For income between R83 001 and R365 000, SBCs pay 7% income tax.

·      For income between R365 001 and R550 000, SBCs pay R19 733 and 21% of taxable income above R365 000.

·      For income above R550 001, SBCs pay R58 583 and 28% of taxable income above R550 000.

(Note: these figures change yearly. The figures above are for the tax year ending between 1 April 2020 to 31 March 2021)

What are the requirements of SBCs?

Businesses should meet the following requirements in order to be classified as a Small Business and receive the benefits.

1.     The business must be a corporate entity

2.     The business must have natural shareholders

3.     The business must accrue less than R20 million in gross income

4.     The shareholders cannot hold shares in any other entity

5.     No more than 20% of the receipts and accruals may be investment income or come from rendering personal services

6.     The business must not be personal service providers

Are you an SBC (or need help figuring out if you are)?

If you have any questions, need help understanding the ins and outs of tax, or are looking to have someone else handle your taxes entirely, contact us at info@smithandrossi.com, via our website, or on social media.