How Much Must a Business Make to Pay Tax in South Africa

How Much Must a Business Make to Pay Tax in South Africa:

A business must make over R1 million in turnover to register for VAT and pay VAT in South Africa. Additionally, all businesses, regardless of turnover, must pay income tax on their taxable profits:

• VAT Registration: Required for businesses with an annual turnover exceeding R1 million. The VAT rate is 15%.
• Corporate Income Tax: Companies must pay 27% on their taxable income.
• Small Business Corporations (SBCs): Benefit from reduced tax rates if their turnover is below R20 million.
• Turnover Tax: Available for micro-businesses with an annual turnover of R1 million or less, offering a simplified tax system.

All businesses must comply with these tax requirements based on their turnover and income levels.

---

In South Africa, businesses are subject to various tax obligations depending on their legal structure, turnover, and profit levels.

Here’s a breakdown of the tax requirements based on different business entities:

Sole Proprietorship and Partnerships

• Turnover Threshold: If the annual turnover exceeds R1 million, the business must register for Value-Added Tax (VAT).
• Income Tax: Sole proprietors and partners pay personal income tax on the profits earned from their business activities. Tax rates are progressive, meaning they increase as income increases.

Companies (Private, Public, and Close Corporations)

• Corporate Income Tax: All companies must pay corporate income tax on their taxable income. As of the 2023/2024 tax year, the corporate income tax rate is 27%.
• Turnover Tax: For micro-businesses with an annual turnover of R1 million or less, a simplified turnover tax system is available. This system combines various taxes (income tax, VAT, dividends tax, and capital gains tax) into a single tax.
• VAT Registration: Any business (including companies) with an annual turnover exceeding R1 million must register for VAT and charge 15% VAT on the goods and services they provide.

Small Business Corporations (SBCs)

• Reduced Tax Rates: SBCs benefit from reduced corporate income tax rates if their turnover is below R20 million. The tax rates for SBCs are progressive, offering tax relief for smaller businesses.

Key Points

• R1 Million Turnover: Businesses with a turnover exceeding R1 million must register for VAT.
• Corporate Income Tax: Companies pay a flat rate of 27% on taxable income.
• Turnover Tax: Available for micro-businesses with a turnover of R1 million or less.
• SBC Benefits: Small Business Corporations with a turnover below R20 million enjoy reduced tax rates.

Understanding these thresholds and tax obligations is crucial for compliance and financial planning. If a business’s revenue or profits exceed these limits, it is essential to register with SARS and fulfil the necessary tax requirements.