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Small Business Corporations Tax – What is it? Do you qualify?

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

  • Is your business Turnover less that R20 million per year?
  • Are the shareholders in your business all natural persons?
  • Do you only own your one business?
  • Does less that 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:

 

Taxable Profit Small Business Tax STD Business Tax Tax Saving
0 – 75 000 0 21 000 21 000
75 001 – 365 000 21 000 102 200 81 200
365 001 – 550 000 59 150 154 000 94 850
Above 550 001 28% 28% Nothing from this point
       

 

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

  • SBC’s 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 SBC’s who pay the maximum rate (i.e. 41%) 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 Phezulu VBO 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.phezulu.net or give us a call on 010 003 8558

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