Company Tax: A Guide for South African SMEs

If you’re a business owner in South Africa, one thing’s for sure: company tax can be rough. Understanding company tax can be daunting for small businesses, especially when balancing growth with tax compliance. However, managing your tax obligations effectively is so important for long-term success. In addition, with the right strategy, businesses can take advantage of various tax incentives while securing small business funding in SA.

The Tax Headache for SMEs

Company tax can be tricky for small businesses. Between the different tax rates, rules and SARS regulations, many entrepreneurs get overwhelmed. Whether you’re an established SME or a start-up, keeping up with your tax responsibilities while managing the daily demands of a business can be a hard nut to crack.

One of the main problems SMEs face is simply understanding the tax laws. While SARS offers tax breaks for small businesses, not everyone knows how to use them. Plus, missing out on tax incentives means you could end up paying more than you should – and no business wants that.

Tax Incentives That Can Help Your Business

Luckily, SARS’ latest tax incentives are specifically designed to help small businesses reduce their tax burden.

1. Small Business Corporation (SBC) Tax Rates

If your small business qualifies as an SBC, you get to pay lower tax rates. For instance, if your taxable income is under R95,750, you won’t need to pay any income tax. After that, there’s a sliding scale, which is much more affordable than the standard company tax rates.

2. Turnover Tax

If your business makes less than R1 million annually, you might qualify for Turnover Tax. This system is easier on your admin and focuses on taxing your turnover (total revenue) instead of profit. It simplifies tax management, so you don’t have to worry about calculating deductions and other complicated paperwork.

3. Employment Tax Incentive (ETI)

Looking to hire young talent? The ETI encourages SMEs to hire employees between the ages of 18 and 29 by offering a reduction in their PAYE (Pay-As-You-Earn) liabilities. This incentive can be claimed for up to 24 months for each qualifying employee, making it easier – and cheaper – to grow your team.

4. Urban Development Zone (UDZ) Allowance

If your business is investing in urban development zones, you can claim accelerated depreciation on capital investments in these areas. This allowance encourages economic growth in designated areas and provides a great opportunity for SMEs looking to expand their footprint.

5. Learnership Allowance

This incentive helps businesses that are focused on skills development and training. If you engage in a learnership agreement with an employee, you can claim additional tax deductions. This not only supports your business in upskilling staff, but also reduces your tax burden.

By taking advantage of these tax incentives, you can reduce the amount you owe, reinvest those savings back into your business, and make your company more attractive to potential funders.

Managing Company Tax and Accessing Small Business Funding in SA

Here’s a key point: if you’re looking for small business funding in SA, your tax compliance matters. Whether you’re applying for a loan, seeking investors, or working with a financial partner, your financial health – including your tax situation – will be scrutinised.

Lenders want to see that your business is in good standing with SARS before approving funding. Ensuring your company tax is up to date and that you’ve taken advantage of all available tax incentives can make your business more appealing to potential funders.

How GroWise Can Help

At GroWise, we understand the challenges that come with running an SME in South Africa, including the complexities of company tax. That’s why we offer fast, no-nonsense small business funding in SA designed to support the growth of businesses. Whether you need to expand your operations or manage working capital, we provide flexible funding solutions to help make the hopes and dreams of your business a reality.