HomeHome SearchSearch MenuMenu Our productsOur products

SMME or SBC? Which you do do you qualify as?

by , 04 May 2015
Did you know that an SMME or Small, Medium or Micro Enterprise differs from an SBC or Small business Corporation by the fact that the SMME isn't actually a business. It actually only serves as a description of the size of a business.

Nevertheless, an SBC must be an incorporated business. In other words, it must be a close corporation, a cooperative or a private company.


Why is this important? Because there are certain tax benefits available to being a SBC whether you're going through the process of registering a business or areregistered already.

SMME also have certain tax benefits. By this we meangrants, incentives or development programmes.

And the one that gets the  most tax benefit is  a SBC.

Here's how to check if you qualify.

These are the three requirements you must meet to qualify as an SBC


Your company has to meet all the following requirements before it can qualify as an SBC (Section 12E of the Income Tax Act):

1. Ownership requirements;
2. Turnover requirements; and
3. Business activity requirements.
Let's look at each of these in more detail.

1. Ownership requirements

Your business must be a close corporation, any private company registered under the Companies Act, a cooperative or a society AND:

 ***********  Best Choice For You ***************

Use this ten-step action plan to ensure you get your Vat refund from SARS on time, every time

Don't let SARS make you wait for your Vat refund.

Claim your ten-step action plan now! And get your Vat refund within the allocated 21 days.


 ***************************************


• Shareholders or members that are natural persons must hold the entire shareholding at all times during the tax year;

• Shareholders must hold the shares for their own benefit and not as nominees;

• Shareholders or members mustn't, at any time during the tax year, hold any shares or any interest in any other close corporation, company, cooperative or society other than:

– A listed company;
– Any portfolio in a unit trust scheme;
– A body corporate established in terms of the Sectional Titles Act, 1986;
– A share block company established in terms of the Share Blocks Control Act;
– An association of persons, cooperative, close corporation, trust and non-profit company
established for the benefit of its members and no distribution of any of its funds to its shareholders  or members is permitted;
– Less than 5% of the interest in a social or consumer cooperative or a cooperative burial society (Section 1 of the Cooperatives Act), or any other similar cooperative if all of the income derived from the trade of that cooperative during any year of assessment is solely derived from its members;
– Any friendly society (Section 1 of the Friendly Societies Act);
– Less than 5% of the interest in a primary savings cooperative bank or a primary savings and loans cooperative bank (Cooperative Banks Act);
– A venture capital company (Section 12J, Income Tax Act);
– Any company, CC or cooperative that hasn't carried on any trade and hasn't owned assets worth more than R5 000 during the year;
– Any company or CC that has taken the steps to liquidate, wind up or deregister. But, this exception won't apply if you take any steps later to prevent liquidation, winding up or deregistration.

Also, keep in mind that, normally, the company or CC will be disqualified as an SBC due to the ownership rule. Now, after the amendment the ownership exclusion won't apply where the company or CC hasn't traded and hasn't owned assets worth more than R5 000 during the tax year.


Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>