How to comply as a Small Business?

Complying with your tax obligations as a small business has been made a lot easier over the past few years. Read below for more information:

• If you are starting out and need to register as a company, you will have to contact the Company and Intellectual Property Commission (CIPC), formerly called CIPRO. Please note that Companies are first required to register with the (CIPC) offices before registering with SARS for an Income Tax reference number, click here for CIPC. Once a taxpayer registered with CIPC, SARS will automatically generate an Income Tax reference number. Taxpayer must then register on eFiling to transact electronically.
• See Registering on eFiling and services available online.
• How to obtain your Tax Clearance Information: As a Small, Micro or Medium Enterprise (SMME), at some point or another you will be required to provide / confirm / share your Tax Clearance information with another entity. This could be to apply for a tender, new contract, good standing or in respect of Foreign Investment.  
• Registering for Turnover Tax. Turnover tax is a simplified tax system for small businesses with a qualifying turnover of not more than R1 million per annum. It is a tax based on the taxable turnover of a business and is available to sole proprietors (individuals), partnerships, close corporations, companies and co-operatives. Turnover tax takes the place of VAT (in the instance that you have not decided to elect back into the VAT system), provisional tax, income tax, capital gains tax, secondary tax on companies (STC) and dividends tax. So qualifying businesses pay a single tax instead of various other taxes. It’s elective – so you choose whether to participate. For Tax Tables see below.
• Registering your business for VAT
• Registering for PAYE, UIF and SDL.
• In the case where you are already registered as a company and you meet certain qualifying requirements, you may register as a small business corporation (SBC) in order to get additional tax incentives. One of the incentives for SBCs is a reduced corporate tax rate. Click here to see reduced tax rates for small businesses.

Entrepreneurs who want to start a business need to be aware of the tax obligations of running a business whether it is in the form of a legal entity or in a personal capacity. It is also important to note the various options with regard to reducing some of the administrative requirements to make tax compliance easier as well as the different tax incentives and rates that may apply in certain instances.

Once you have decided on the type of business entity that is to be established and it is a legal entity, you must register with the Companies and Intellectual Property Commission (CIPC). See their website at www.cipc.co.za.

The following legal entities are required to register at CIPC and as a taxpayer for corporate income tax purposes:

• Listed public companies
• Unlisted public companies
• Private companies
• Close corporations (Note that from 1 May 2011, no new close corporations will be registered)
• Co‐operatives
• Non-profit companies
• State owned companies
• Collective investment schemes
• Other

In the case of starting a business that is not a legal entity, it can be done in the form of the following:

• Sole proprietorship (taxed on profits in an individual capacity)
• Partnership (note that each partner is taxed on their share of taxable profits in an individual capacity, as a partnership is not registered separately for income tax purposes)

If you are a close corporation, co-operative or a private company, you may qualify for certain tax incentives and preferential rates in terms of the small business corporation (SBC) incentive. Alternatively, if you are a natural person or a company and you meet specific requirements, you may qualify for the turnover tax system.  

For information on the types of business you can establish and the tax implications for each one, click here.  

Small Business Corporation Tax Table for years of assessment ending any date between 1 April 2023 and 31 March 2024:

Source: South African Revenue Services

For any assistance with you small business corporation tax please don’t hesitate to contact us for expert tax advice. Whatsapp 0823007954 , e-mail rodney@probizserv.co.za , https://www.probizserv.co.za/contact