Running a small business in South Africa? Understanding your tax duties is key to success. This guide explains taxes for sole proprietors, partnerships, close corporations, and companies, and what reliefs or benefits you can claim to boost your growth.

What is Tax for Small Businesses?

Taxes are payments businesses make to SARS (South African Revenue Service) based on their income. Whether you are a sole trader, partnership, private company, or close corporation, you must register for tax within 21 business days of starting your business.

Business Types and Their Tax Rules

Sole Proprietorship

• You and the business are the same.

• Profits are taxed as your personal income.

• Advantage: Easy to set up.

• Disadvantage: Unlimited liability – personal assets can pay business debts.

Partnership

• Two or more people share profits and losses.

• Each partner is taxed on their share.

• Advantage: Combines skills and funds.

• Disadvantage: Partners are liable for each other’s mistakes.

  
  

Private Company (Pty Ltd)

• Treated as a separate legal entity.

• Pays 27% tax on profits.

• Advantage: Easier to raise funds.

• Disadvantage: More legal requirements.

  
  

Close Corporation (CC)

• Similar to a private company but no longer registerable (since 2011).

• Existing CCs still operate and pay company tax rates.

  
  

Tax Reliefs for Small Businesses

South Africa supports small businesses with tax reliefs:

Small Business Corporations (SBC)

• For businesses with a turnover under R20 million.

• Progressive tax rates starting at 0% up to R95,750 profit, then scaling up.

• Accelerated depreciation on assets – write off manufacturing equipment faster.

  
  

Micro Businesses (Turnover Tax)

• For turnover below R1 million.

• Pay tax based on total turnover, not profit.

• Simplified reporting, saving you time and paperwork.

Other Taxes to Know

✔ Value Added Tax (VAT)

• Register if turnover exceeds R1 million in 12 months.

• Standard VAT rate is 15%.

✔ PAYE (Pay-As-You-Earn)

• Deducted from employee salaries monthly.

• Businesses must register if paying staff above tax thresholds.

✔ Provisional Tax

• Paid twice yearly by businesses earning non-salary income to cover the annual tax due.

✔ Capital Gains Tax (CGT)

• Tax on profit when selling business assets.

SARS eFiling: Making Tax Easy

Use SARS eFiling or the SARS MobiApp to:

• File tax returns

• Pay taxes

• View notices and assessments

Record Keeping Requirements

Businesses must keep all tax records for at least 5 years. This includes:

• Invoices

• Bank statements

• Tax returns

• PAYE submissions

Penalties for Non-Compliance

Failure to:

• Register on time

• Submit tax returns

• Pay taxes due

can result in interest charges, penalties, or legal action. Stay compliant to avoid disruptions in your business operations.

Final Takeaway

Managing tax is as important as making sales. Seek a qualified tax advisor or accountant to help you navigate complex laws, maximise deductions, and avoid penalties.