WHAT IS SMALL BUSINESS CORPORATIONS TAX

Article by:Hartebeespoort Accountant: MARITZA EYBERS

Is your business viewed as a Small Business Corporation by SARS?

• Is your business turnover less than R20 million per year?
• Are the shareholders in your business all natural persons?
• Do you only own your one business?
• Does less than 20% of your turnover come from “investment” income?
• Is less than 20% of your income from rendering a “personal” service?

If you have answered YES to all the above questions your business could be making massive Income Tax savings.

Are the Small Business Corporation Income Tax Savings worth it?

The table below will illustrate the savings:

Income Profit	Small Business Tax	STD Business Tax	Tax Savings
0 - 95 750	0	25 853	25 853
95 751 - 365 000	18 847	98 550	79 703
365 001 - 550 000	57 698	154 000	96 302
550 001	27%	27%	Nothing from here

Besides the Income Tax savings, how else do you gain from being a Small Business Corporation?

• SBCs are allowed to depreciate their productive assets at a faster rate than other businesses. Depreciation, although not a physical cash cost, is captured as an expense on your income statement thereby reducing your profit and as you can see from the table above, smaller profits equals less tax.
• Shareholders of SBCs who pay the maximum rate (i.e. 45%) on their income, have the opportunity to gain a tax benefit by using a mixture of salary and dividends.

As you can see, the correct tax planning will save both you and your business money, therefore when chatting to your advisor, be very open about your goals and how you plan to reach them.

The more information we have the better we can assist you with a suitable plan, however please bear in mind that although we advise you not to obsess about your tax planning, you should review your plan every six months at least.

At SME.TAX we do more than just assist clients with planning their taxes, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website www.sme.tax or give us a call on 012 021 0829