When you are a small business, chances are that you manage it yourself and that the profit of the business is your main priority. Most small businesses are driven by entrepreneurs and there might have been a situation, once or twice, where you have wished you knew something a long time ago. This might just be one of those situations and we might have some good news for you.
We all know that tax is a reality and most small businesses feel that pressure all too often. Paying your tax is the right thing to do and no-one would be happy with the idea of the Tax Man coming to knock on your business’ doors. The good news that we have might be something you already know, but if you don’t. What a great bonus; in all literal meaning of the word.
Companies and Close Corporations are currently taxed at 28%. If you qualify as a small business corporation you will pay tax on a lower scale than the current 28% and can save up to R59 700 per year on your tax.
This is how you will pay tax on your profit if you qualify as a small business corporation:
R0 – R57 000 will have you paying nil tax.
R57 001 – R300 000 you only have to pay 10% tax on the amount over R57 000.
R300 001 or more, will have you paying R24 300 and 28% of any amount over R300 000.
To qualify as a small business corporation, you need to comply with the following:
1. All shareholders or members need to be natural persons who hold no shares in private companies or members’ interest in any other entities other than those which are inactive and have assets of less than R5 000.
2. The business’ gross income should not exceed R14 million.
3. Not more than 20% of the gross income and all the capital gains consist collectively of investment income and income from rendering a personal service. Should the company render personal services (accountants, attorneys, etc) it will still qualify where such a small business corporation employees three or more unconnected full time employees for core operations.
4. The business is not an employment entity.
This is a great way to save on those taxes. Some small business owners like you might have paid more tax than they should have. With profit being your main priority, especially if you are an entrepreneur and want to see your ideas turn into money, an additional R59 700, sure can make a big difference.
The Tax Man is not that bad after all; you just need to read a lot more about him.