Office Badger | Small Business Corporations – Reduce your income tax payable
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Small Business Corporations – Reduce your income tax payable

11 Sep Small Business Corporations – Reduce your income tax payable

Small Business Corporations

SARS introduced the small business corporation to assist companies with lower income tax rates and preferential asset write off periods should certain criteria be met. The goal is to encourage and empower small businesses with lower tax rates so that the profits can be re-invested for growth.

A Small Business Corporation receives:

  • Reduced income tax rates from the 28% standard income tax rate per the following sliding table:
Taxable income (R) ​Rate of tax (R)
0 – 75 750 0%
75 751 – 365 000 7% of taxable income above 75 750
​365 001 – 550 000 20 248 + 21% of taxable income above 365 000
​550 001 and above 59 098 + 28% of taxable income above 550 000

 

  • Accelerated write downs of business assets over fewer years thus reducing taxable income.

 

However, there are a few qualifying provisions put in place by SARS:

  • The shareholder’s or members must be humans and must only hold an interest in that specific entity, excluding listed shares
  • The revenue or gross income of the business must not exceed R20mn
  • The big catch then comes in, in that certain business activities are excluded unless the owners employ 3 full-time employees besides themselves. This is applicable when the business performs any of the below:
    • Architecture
    • Health
    • Education
    • Law
    • Real Estate
  • Additional provisions also apply

 

Taking advantage of the Small Business Corporation enables you to retain more of your profits for future growth.

Contact us for assistance and additional information

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