Did you know that there are 12 different tax incentives available for businesses in South Africa, ranging from export incentives to manufacturing incentives, special economic zones, youth employment incentives, and the latest green economy incentives. However, in this video, I will focus on the small business tax incentive.
Understanding the small business tax incentive is crucial for entrepreneurs. While taxes are unavoidable, applying this incentive to your business can potentially save you thousands of rands. So, join me as I explain everything you need to know about the small business tax incentive.
There are two categories of small business tax incentives: Turnover Tax and Small Business Tax, which apply to both sole proprietors and registered companies.
Turnover tax is designed to simplify tax obligations by replacing Income Tax, VAT, Provisional Tax, Capital Gains Tax, and Dividends Tax with a single tax, namely Turnover Tax. Apart from the simplification into a single tax, there is the additional benefit of reduced record-keeping requirements, as no records of tax-deductible expenses are required. However, the most significant incentive is the potential tax saving.
Let's take a look at the Turnover Tax Table. As you can see, you pay zero tax on the first R335k turnover for the year. After that, it starts at 1% of each rand above R335k and progressively increases in stages up to a maximum of R6650 + 3% above R750k turnover for each year.
Turnover (R) Rate Of Tax (R)
0 - 335 000 0%
335 001 - 500 000 1% of each R1 above 335 000
500 001 - 750 000 1650 + 2% of the amount above 500 000
750 001 and above 6650 + 3% of the amount above 750 000
When compared to the 27% tax on profit for standard company tax, this represents a significant saving. Turnover tax is paid to SARS in three instalments: the first at the end of February, the next at the end of August, and the final top-up payment is made between July and January.
Most small businesses are eligible for turnover tax, with a few exceptions such as labour brokers, public benefit organizations, and personal service providers.
The second category of the small business tax incentive is for businesses with an annual turnover of less than R20m. As you can see from the following tax table, the tax rates are very favourable and also increase progressively in stages, just like the turnover tax. However, this time the tax is based on the profit and not the turnover, which means all your expenses are deducted first tax is paid on the profits.
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 + 28% of the amount above 550 000
To qualify for this small business tax incentive, you need to meet certain criteria. For example, all the shareholders must be natural persons, and you can only be a shareholder in one business. Additionally, the business cannot earn investment income of more than 20% of its turnover.
If you haven't already taken advantage of these incentives, I suggest you talk to your accountant to determine if you qualify.
I hope you have found this information helpful. As always, remember that we are here to help.
26 авг 2024
