Nobody likes to pay business tax. It is seen as a grudge purchase that you have no choice in buying.

But, the tax makes the country go around, and business and personal tax is part of that merry-go-round.

So what are you, as an SME, responsible for paying?

Corporate Tax

The standard tax rate is 28% in South Africa. Some company structures may pay less based on how they perform and are registered.

All registered businesses have to pay tax to SARS. Regardless of whether you earn in SA or worldwide, you are liable to pay tax on that business income.

If your business is based outside of SA, but you operate in the country, you only pay tax on the income derived from SA.

The types of registered companies that are liable to pay tax are:

• Listed and unlisted public companies
• Private companies
• Close corporations
• Co-operatives
• Collective investment schemes
• Small business corporations
• Share block companies
• Corporate bodies
• Public benefit companies
• Dormant companies

Sole Trader and corporate partner tax

If you are registered as a self-employed, freelance worker, or trade as a sole-proprietorship or partnership, you are taxed as an individual. Instead of a business tax return, you need to submit the personal income tax (ITR12).

Small business tax

A sole trader can operate as self-employed. If you choose to register a business, however, the rules change. Depending on how you have registered your business, you must submit different documents.

A standard private company or CC pays the regular 28% corporate tax in SA. You can, however, have a look at other tax break opportunities.

Register as a micro-business for turnover tax

If your business is registered as a sole proprietor, partnership, or Close Corporation and has a turnover less than R1million a year, you may qualify as a micro-business. Depending on your business, you can pay turnover tax, Vat and employees tax biannually.

Register as a small business corporation

If you have a turnover less than R20million, you can potentially pay less corporate tax than other companies.

Turnover tax as an alternative

As a simplified method of business tax in SA, turnover tax is specifically for small businesses. It will replace corporate income tax, vat, capital gains, and dividends tax in SA. Your business must have a turnover of less than an R1million.

It is essential to know where your business fits in the spectrum and ensure you pay the correct tax.

To remain tax compliant is the way to run a great company and is required if you ever want to sell your company or raise capital.

If you are unsure about your tax status, speak to your accountant.

Bizcash is a South African company that wants to grow SMEs in SA to ensure a sustainable future for all.

Speak to our team to find out more about how we can support your business with alternative funding options. Get in touch with us on 0861 93 93 93 or email us on info@bizcashscf.co.za or contact us here.

For more business tips, follow our social media pages