Small businesses are the backbone of the South African economy, accounting for a significant portion of employment and economic activity. However, many small businesses struggle with high tax burdens and complex tax regulations. To support small businesses, the South African government has introduced tax systems designed to simplify tax compliance and reduce the tax burden for qualifying businesses. Two of the most important tax systems for small businesses in South Africa are Turnover Tax and Small Business Corporation Tax (SBC Tax).
Turnover Tax
Turnover Tax is a simplified tax system for small businesses with an annual turnover of less than R1 million. This system was introduced in 2009 as part of the government’s efforts to support small businesses and reduce their tax burden. Under Turnover Tax, businesses pay a percentage of their annual turnover as tax, rather than paying individual taxes on income, VAT, and other taxes.
Turnover Tax has several benefits for small businesses, including:
- Simplified tax compliance: Small businesses often struggle with complex tax regulations and compliance requirements. Turnover Tax simplifies tax compliance by providing a single tax system for small businesses.
- Lower tax liability: Turnover Tax rates are generally lower than individual tax rates, VAT, and other taxes, which can reduce the tax burden for small businesses.
- Cash flow benefits: Since Turnover Tax is based on turnover, rather than profit, small businesses can benefit from improved cash flow, especially during periods of low profitability.
The qualifying criteria for Turnover Tax are straightforward:
- The business must have a turnover of less than R1 million per annum.
- The business must be a sole proprietorship, partnership, close corporation, or a company.
- The business must not be a personal service provider
- The business can not be a public benefit organization, recreational club, association of persons or a small business funding entity.
Turnover Tax Rates for 2024
| Taxable Turnover (R) | Rate of tax (R) |
| 1 – 335 000 | 0% of taxable turnover |
| 335 001 – 500 000 | 1% of taxable turnover above 335 000 |
| 500 001 – 750 000 | 1 650 + 2% of taxable turnover above 500 000 |
| 750 001 and above | 6 650 + 3% of taxable turnover above 750 000 |
Small Business Corporation Tax (SBC Tax)
Small Business Corporation (SBC) Tax is another tax system designed to support small businesses in South Africa. Under this system, qualifying businesses are taxed at a reduced rate on their taxable income. The tax rate for SBC’s are significantly lower than the standard corporate tax rate of 27%.
SBC Tax has several benefits for small businesses, including:
- Lower tax liability: The reduced tax rate can significantly reduce the tax burden for small businesses, allowing them to reinvest more of their profits in their businesses.
- Improved cash flow: SBC Tax can provide cash flow benefits for small businesses, especially during periods of low profitability.
- Tax incentives: SBC Tax provides tax incentives for small businesses, encouraging entrepreneurship and small business growth
To qualify for SBC Tax, a business must meet the following criteria:
1. All shareholders must be natural persons
2. The business must have a gross income of no more than R20 million per annum.
3. All shareholders hold no shares in any other private company
4. The business must not be a personal service provider, i.e., a business that provides services as a sole trader, partnership, or personal service company.
5. The business must not be an investment holding company, a property letting company, or a trading company that earns more than 20% of its income from investment income or rendering personal services.
SBC Tax Rates for 2024 Tax year
| Taxable Income (R) | Rate of Tax (R) |
| R1 – R95,750 | 0% |
| R95,751 – R365,000 | 7% of taxable income above R95,750 |
| R365,001 – R550,000 | R18,848+ 21% of taxable income above R365,000 |
| R550,001 and above | R57,698 + 27% of taxable income above R550,000 |
How Obie Accounting Services Can Help Small Businesses
Navigating tax regulations can be daunting, especially for small business owners who need to focus on growing their businesses. Obie Accounting Services offers quality accounting and tax services to small businesses in South Africa, helping entrepreneurs to take advantage of tax regimes such as Turnover Tax and SBC Tax.
Obie Accounting Services can assist small businesses in the following ways:
1. Compliance: Obie Accounting Services can help small businesses to comply with tax regulations, ensuring that they file their tax returns on time and pay the correct amount of tax.
3. Advice: Obie Accounting Services can provide advice to small businesses on tax planning, cash flow management, and other financial matters, helping them to make informed decisions about their businesses.
Conclusion
Turnover Tax and SBC Tax are two tax systems designed to support small businesses in South Africa. These tax systems offer simplified tax compliance, lower tax liability, and cash flow benefits for qualifying businesses. Obie Accounting Services can help small businesses to take advantage of these tax systems, ensuring that they meet the qualifying criteria, comply with tax regulations, and receive the maximum benefits from these tax systems. By partnering with Obie Accounting Services, small businesses can focus on growing their businesses, knowing that their tax affairs are in good hands
