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How to pay less tax if you're a Small Business Corporation!

by , 30 July 2015
Do you know how to make sure your small business pays less tax?

Well, SARS has tax incentives that only small businesses qualify for! You'll enjoy lower tax rates plus a couple of tax incentives!

But before you can start enjoying the tax benefits and incentives for SBCs, you need to make sure your business qualifies first.

So read on to see if your business qualifies as an SBC and how you can benefit!

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I have a small business. Do I qualify?

Your company has to meet certain requirements before you can qualify as an SBC.

Click here on how to ensure your business qualifies as an SBC

Great! I meet the Criteria. What are the benefits?

SBCs enjoy lower tax rates

An SBC enjoys lower tax rates than other companies. The SBC tax rates are as follows:

Year ending 28 February 2014 Year ending 28 February 2015
Taxable income Tax rate Taxable income Tax rate
R0 – 67 111 0% R0 – 70 700 0%
R67 112 – 365 000 7% of the
amount above
R67 111
R70 701 – 365 000 7% of the
amount above
R70 700
R365 001 – 550 000 R20 852 + 21%
more of the amount
above R365 000
R365 001 – 550 000 R20 601 + 21%
more of the amount
above R365 000
R550 001 and above R59 702 + 28% of amount above R550 000 R550 001 and above R59 451 + 28% of amount above R550 000
 

Two tax incentives your SBC qualifies for!
 
Tax Incentive #1: SBCs deduct all manufacturing costs on year one

The cost of any asset used to manufacture and brought into use after April 2001, you can deduct it the same year you bought it.


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Attention small business owners:

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Tax incentive #2: You can write off non-manufacturing assets

An SBC can write off any non-manufacturing asset if signed and agreed to by every party. You can write it off by:
  • Under the allowance under the Income Tax Act; or
  • At the rate of 50% of the cost of the asset in the tax year when it was first bought, 30% in the first succeeding year and 20% in the second succeeding year.

Plus there's additional incentives enjoyed by SBCs

Cooperatives and Societies that operate as SBCs enjoy the same tax privileges.

This is because the Income Tax Act views them as a company.

Tax relief for reinvesting the proceeds from the sale of your business assets

SARS provides tax relief for ordinary income and capital gains taxes (CGT). Only when the proceeds from the sale of movable business assets are reinvested in other movable assets within an 18-month period.

In other words, you must use the profit or gain that you make on such a disposal to buy a new movable asset. You can then depreciate this new asset, giving you even further tax relief.

P.S. We have the ultimate provisional tax guide! It's called the Provisional Tax 101; it covers provisional tax from start to finish. Take a look…







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