Tax advantages of being a Small Business Corporation (SBC)

Conditions and terms:

1. Any CC, Co-op or Private Company

2. Shareholders/Members must be natural persons

3. Gross income must not exceed:
 - R 5 million (periods ending after 1/4/2003)
 - Amended to R 6 million (periods ending after 1/4/2005)
 - Amended to R 14 million (periods ending after 1/4/2006)

4. None of the shareholders/members may hold any shareholding in another Company/CC (excluding listed companies)

5. Investment income (interest/dividends/rental etc) and income from Personal service must not make up more than 20% of total income

6.Personal service refers to:
accounting, auditing, actuarial, architecture, consulting, draftmans, engineering, law, arts, secretarial, health, IT, real estate, broadcasting, consulting, information technology, journalism, surveying, sports, translation, valuation, veterinary, auctioneering, broking, commercial arts, education, entertainment, research
If a company/CC rendering a personal service employ 3 or more full-time employees (excluding shareholders/members and connected persons) than the income is excluded from the 20% limit....in other words only the investment income is subject to the 20% rule

7. If a company/CC only traded for part of the year as a SBC, then the amounts must be apportioned.

If all the above is met then:
-Taxable income for periods ending on or after 1/4/2003
-15% on first R 100,000
-30% of taxable income exceeding R 100,000

Amended
Taxable income for periods ending on or after 1/4/2005
0 - 35,000 is 0%
35,001 - 250,000 is 10%
over 250,000 is 29%

Amended 2
Taxable income for periods ending on or after 1/4/2006
0 - 40,000 is 0%
40,001 - 300,000 is 10%
over 300,000 is 29%

Amended 3
Taxable income for periods ending on or after 1/4/2007
0 - 43,000 is 0%
43,001 - 300,000 is 10%
over 300,000 is 29%

Assets (used in manufacturing process) are written off in full (100%)
Non-manufacturing assets are written off on the 50/30/20 basis.
You need to inform SARS via written correspondence that you comply with the criteria for a SBC.