Small Business Corporation Tax

Are you the owner of a small to medium sized business?

Do you require information regarding small business corporation tax and small business tax compensation? Then look no further than this article.

We'd like to start with some good news. If you are a small business and want to take advantage of small business tax compensation, the time is now. Because the deadline to register as a micro business for the year of assessment 1 March 2010 is 30 April 2010.

But let's start by defining a small business. The South African Revenue Services (SARS) defines a small business as an organisation that has less than R14m turnover per year. If you are a registered close corporation the member must be a natural person and not part of another organisation.

Tax Benefits for Small Businesses

I believe this is why you are reading this article. You are looking for ways to gain small business tax benefits as a small business owner.

If your business income is equal to or less than R57 000 annually you don't need to pay tax. Any taxable income received above R57 000 up to R300 000 is taxed on a sliding scale of 10%.

Normal corporations are taxed on a flat rate of 28%.

Turnover Tax Advantages for Small Businesses

If your small business shows sales of less than R1m for any given financial year you can benefit through turnover tax. This type of tax was introduced by SARS at the beginning of March 2009 to simplify the lives of small business owners.

This is done by:

• not levying VAT; and

• not applying secondary tax on companies where dividends are less than R200 000 per annum.

Turnover tax advantages for small businesses also applies to capital gains tax where the turnover tax will only include 50% of the amounts received from the disposal of business assets in taxable turnover. If you have immovable property it will only be included to the extent it was used for business purposes. All the proceeds from capital gains are excluded from the R1 m turnover limit.

For any other queries regarding small business corporation please contact us, a registered tax practitioner situated in Gauteng.