Small Business Corporation

In previous articles, I mentioned the tax benefits of your company registered as a small business corporation.Today I will focus more in depth into the requirements to meet in order to qualify as a small business corporation.

-   All shareholders must be individuals. Shares my not be held by a Trust or other entity type. 

-   These individuals my not hold shares any other private company or Closed Corporation.  This are not applicable to  listed shares. 

-   If, however, one of these individuals do hold shares or members interest in a dormant company or Closed Corporation and the asset value is less than R 5,000 OR has taken steps to wind-up the company, it can still qualify as a small business corporation. 

-   Company may not be receiving gross income of more than 20% from the following activities: 

1. Personal services.  Examples: Architecture, education, engineering, management, consulting, accounting services, attorneys, journalism, IT, brokers etc.If, however, these companies employ three (3) or more full-time employees, it will still be able to qualify as a small business corporation.  These employees may not be connected parties to the directors or shareholders.
2. Investment income: Examples: Interest, dividends, trading of financial instruments and rental income from fixed property.

The tax rates are very attractive for start-up companies, but please do read my article on estate risk protection.

The small business corporation tax rates for financial years ending between 1 April 2018 and 31 March 2019:

 

Taxable income                                         Tax rate

R 0 - R 78,150                                          -  No income tax payable

R 78,151 - R 365,000                               -  7% of taxable income above R 78,150

R 365,001 - R 550,000                             -  R 20,080 + 21% of taxable income above R 365,000

Above R 550,000                                      -  R 58,930 + 28% of taxable income above R 550,000

 

Apart from these lower income tax tables, a small business corporation also receives a favourable deprecation:

-      New and unused manufacturing plant, equipment and machinery. 

-      All other assets on a scale of 50:30:20.

Feel free to contact us for monthly accounting and tax assistance.

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