Small Business Corporations and you.
During the State of the Nation Address last week President Cyril Ramaphosa raised many important points that had the nation talking.
Key points on SONA
One of the key points he raised was South Africa’s Economy that has been under extreme strain these last couple of months due to mismanagement of resources, corruption and alleged state capture. Just to name a few. He is also a firm believer that small business enterprises form the backbone of our economy.
Income tax act 58 of 1962
It is undoubtable true that South Africa is the land of opportunity and that there is a new business to be started just around the corner. Luckily the South African Revenue services is there to help. Not many small business owners know about the Income tax act 58 of 1962. In section 12E there is a golden nugget that if your business qualifies, will bring much needed tax relief to your business and will help to free up cash flow spent on tax to grow your business.
Without getting into the SARS legal jargon that will put you to sleep in a jiffy, we will concisely break down what the act is all about and what benefits you can receive should your business qualify.
Section 12E – breakdown
What are the qualifying requirements needed for your Small Business Corporation (SBC) to receive these tax benefits? The requirements comprise out of four key areas. Your business should qualify for all four areas. No more and no less.
The qualifying criteria includes:
- Legal entity requirement
- Holder of shares requirement
- Gross income limitation
- Business activity requirement.
Two main benefits:
Ok here comes the good part, should your business qualify as an SBC there are two main benefits, one being that you can depreciate your assets at an accelerated rate which in turn lowers your taxable income. The other is that SARS allows your company to pay tax at lowered concessionary tax rate which follow a graduated marginal structure of ( 0%, 7%, 21% and 28%) as opposed to a corporate flat rate of 28%.
Running a small business in South Africa has its perks. We will be glad to assist you to unlock your full tax saving potential. If you need more information on this act, and to determine if your business qualify please feel free to contact us at firstname.lastname@example.org.
No tax matter too big or small, we’ve got this! Start saving in tax today.