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Small Business Corporation Tax

A ‘small business corporation’ is defined as a close corporation or co-operative or a private company as defined in s 1 of the Companies Act 71 of 2008, all the shareholders of which are at all times during the year of assessment natural persons. In addition, all of the following requirements must be met:

  1. The gross income for the year of assessment must not exceed R20 million. If the close corporation, co-operative or company carries on a trade involving the asset for less than twelve months in a particular year of assessment, the amount of R20 million is reduced in the proportion the number of months during which trade was carried on relative to twelve months. In this determination a part of a month is reckoned as a full month. In other words, if the taxpayer carried on a trade for six months, the maximum gross income for the year cannot exceed R10 million.

    *‘Gross income’ includes, amongst others, trade income, interest and all dividends, whether or not they qualify for any exemption. In other words, it is the receipts and accruals, including those that are exempt, of the close corporation or company that are relevant for the purpose of this requirement; not its taxable income or profits. Taxable capital gains, being included in taxable income in terms of section 26A, are not included in the definition of the term ‘gross income’ in section 1 and are therefore ignored for this purpose.

  2. None of the members (of a Close Corporation) or shareholders must at any time during the year of assessment hold any shares or interest in the equity of ‘any other company’, other than:–

    1. a ‘listed company’ as described in para (a) of the definition of a ‘listed company’ in section 1, which is a company whose shares or depository receipts for its shares are listed on an ‘exchange’ as defined in section 1 and licensed under section 10 of the Securities Services Act 36 of 2004;

    2. participatory interests in a collective investment scheme;

    3. shares or interests in a body corporate established in terms of the Sectional Titles Act 95 of 1986, a share block company established in terms of the Share Blocks Control Act 59 of 1980 and any other association of persons formed solely for the purposes of managing the collective interests common to all members - referred to in section 10(1)(e)(i)(aa), (bb) or (cc);

    4. less than 5% of the interest in a social or consumer co-operative or a co-operative burial society as defined in section 1 of the Co-Operatives Act 14 of 2005, or any similar co-operative if all its income derived from trade during any year of assessment is solely derived from members;

    5. interests in a friendly society as defined in section 1 of the Friendly Societies Act 25 of 1956;

    6. less than 5% of the interest in a primary savings co-operative bank or a primary savings and loans co-operative bank as defined in the Co-operative Banks Act, 2007, which may provide, participate in or undertake only:

      1. in the case of a primary savings co-operative bank, banking services envisaged in section 14(1)(a) to (d) of that Act; and

      2. in the case of a primary savings and loans co-operative bank, banking services envisaged in section 14(2)(a) or (b) of that Act.

    7. shares or any interest in the equity of a venture capital company as defined in section 12J(1);

    8. a company, close corporation or co-operative if it:

      1. has not during any year of assessment carried on any trade; and

      2. has not during any year of assessment owned assets whose total market value exceeds R5 000; or

      3. a company, co-operative or close corporation if it has taken the steps referred to in section 41(4) to liquidate, wind up or deregister. But this provision ceases to apply if the company, co-operative or close corporation has at any stage withdrawn any step so taken or does anything to invalidate any step so taken, with the result that it will not be liquidated, wound up or deregistered.

  3. Not more than 20% of the gross income and all the capital gains may consist collectively of investment income and income from rendering a personal service.

    *Investment income includes any annuity, interest, rental income, royalty or any income of a similar nature, local dividends, foreign dividends (from 1 April 2012) and any proceeds derived from investment or trading in financial instruments (including futures, options and other derivatives), marketable securities or immovable property.

    *Personal service includes any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draughtsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science, which is performed personally by any person who holds an interest in the company, co-operative or close corporation, except where such small business corporation employs three or more unconnected full-time employees for core operations throughout the year of assessment

  4. The company, close corporation or co-operative is not an employment entity.

Years of assessment ending between 1 April 2012 and 31 March 2013

Taxable income Rates of tax:

R 0 - R 63 556:Nil
R 63 557 - R350 000:7% of the amount over R 63 556
R350 001+:R20 051 + 28% of the amount over R350 000

 

Years of assessment ending between 1 April 2013 and 31 March 2014

Taxable income Rates of tax

R 0 - R 67 111:Nil
R 67 112 - R365 000:7% of the amount over R 67 111
R365 001 - R550 000:R20 852 + 21% of the amount over R365 000
R550 001+:R59 702 + 28% of the amount over R550 000

 

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