TAX BENEFITS CAN POWER YOUR BUSINESS GROWTH
- Business Sense
- Jun 19
- 3 min read
Updated: Jun 24
Let’s face it, when most of us hear the word SARS, our fight or-flight instinct kicks in. We picture forms, audits, and those polite-but terrifying “letters of demand”.
Do you know that South Africa has one of the most progressive tax systems in the world? So before you run for the hills let me surprise and delight you: SARS (South African Revenue Services) actually offers some amazing tax benefits for small businesses and entrepreneurs. Benefits you can use to power your business by reducing your tax liability and keeping more cash in the business.
Turnover Tax: Because Simple can be Sexy
For businesses with a turnover under R1 million, SARS offers a system called Turnover Tax. T his is perfect for the kind of entrepreneur who panics when they hear the word administration.
If you apply Turnover Tax, you get to pay tax based on your sales, not your income after expenses, depreciation, interest etc. It’s a simplified system that reduces both your admin and your stress induced wine consumption. This structure is great for very small businesses with very few overheads. Just make sure you’re not also registered for VAT – SARS doesn’t like double dipping. Run the numbers and see if it wouldn’t maybe suit you better to be in this tax system.
Small Business Corporation (SBC) Tax Rates: The VIP Lane for Small Business
This is one of the best things SARS ever did for small businesses in South Africa, and a phenomenal incentive for entrepreneurs to employ people. If your turnover is below R20 million a year, you only own one business, and employ three non-related staff members, you will qualify for SBC tax rates. This means lower tax brackets on your first R550,000 of profit. Normal companies will pay company income tax per year of R148,500 on their first R550,000 profit (that’s a rate of 27%), whereas businesses who qualify for SBC will only pay R57,698 (that’s a massively reduced rate of only 10.49%) company tax on their first R550,000 profit. That is a significant saving of R90,802 per year, which you then get to reinvest back into your business for growth.
Section 12C and 12E: Very Useful Deductions
We all know that we can write off the cost of (depreciate) our capital purchases over a set amount of time, prescribed by SARS.
■ Section 12C is ideal for any type of manufacturing business – The act lets you claim accelerated depreciation on certain capital assets – particularly machinery and equipment used in manufacturing or production (40% year 1, 20% per year thereafter).
■ Section 12E is the turbo boost for Small Business Corporations (SBC). The Act allows qualifying SBCs to also claim accelerated depreciation on assets — including office equipment, furniture, delivery vehicles, and machinery (100% in year 1).
Employment Tax Incentive (ETI): SARS Wants You to Hire People
This one’s is an absolute gem and my personal favourite. Hire young South Africans (aged 18–29) and you can claim up to R1,000 per employee per month off your PAYE bill. It’s like SARS is helping you to build your team. T here’s paperwork (of course), but if there was ever a reason to employ our young people – this is it. You are already doing the right thing by backing our young talent, so it’s a double win to be rewarded for it too.
VAT Registration Threshold: Perception is Truth
If your turnover is below R1 million, you’re not required to register for VAT – but you can choose to. And sometimes, it’s a smart move – especially if your clients are VAT-registered businesses who don’t mind a little input VAT in their life. The reasons businesses like working with VAT registered entities is because there is an unspoken knowing that your business is more compliant than others. Being VAT registered you need to submit returns to SARS every two months. Which means you more than likely have an accountant and are a good standing trustworthy member of society.
Running a business is hard and SARS doesn’t always make it easier—but sometimes, it does actually help. You just need to know where to look. Or better yet, partner with someone who speaks fluent Taxanese. Numbers don’t lie, but they also don’t speak unless you know what to look for, and you ask the right questions.
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