Mar 26, 2011

Small Business Owners Benefit From Tax ConcessionsBy Gareth CottenTimesLive.co.za

While the majority of businesses are subject to the standard corporate tax rate (currently 28%), very few business owners realise that there are two dispensations, available only to small businesses, that entail a number of tax concessions.

These have been introduced for the dual purposes of expanding the small business sector by offering tax relief and expanding the “tax net” to increase the number of businesses complying with tax law and contributing to the fiscus.

A small business corporation (SBC) is not a separate legal form of business (such as a close corporation or private company), but rather a tax “concession” that existing businesses can qualify for.

While there are certain specific benefits to qualifying as an SBC, such as accelerated asset write-off periods, the main benefit comes from paying a reduced percentage of tax on profits in a tiered manner – compared with a flat rate of 28% for a standard business. For the 2010-11 tax year (which applies to most tax returns being completed at the moment and in the near future), a qualifying SBC pays 0% tax on the first R57000 profit made during the year. After that, it pays tax at only 10% on profit up to R300000. Only on annual profits over R300000 does the standard rate of 28% apply. There’s a potential tax saving of as much as R60000 a year.

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