3 main requirements to ensure your ‘Small Business Corporation’ qualifies for tax benefits and exemptions

Small, Medium or Micro Enterprises (SMMEs) and Small Business Corporations (SBCs) can both benefit from special tax rates and exemptions.

But the benefits for each of them are different to one another, with the benefits for SBCs being the greatest.

So to avoid being penalised for applying for the benefits and exemptions of a SBC when you’re actually not one, take note of these 3 requirements for determining whether you are:
Requirement#1: Ownership

An SBC must be an incorporated business, such as a close corporation, a cooperative or a private company.

Requirement#2: Turnover

There are 2 main turnover requirements for you to be considered an SBC and they are that:

1. You must have a gross income of less than R 20 million in a tax year (12 months), with it being prorated for periods less than 12 months; and

2. Investment income and income gained from providing services may not comprise more than 20% of the sum of the gross income and capital gains (i.e. Capital gains + gross income).

TIP: You can determine if you’ll exceed the limit of R20 million in a full tax year by dividing the amount of your current turnover by the number of months you’ve traded, and then multiplying it by 12.

For example, if you’ve traded for 6 months, and your turnover for that is R12 million, then:
12 000 000 / 6 = R2 million  X  12 = R24 million. Therefore, in this example, you would not qualify as an SBC.

Requirement#3: Business Activity

The company can’t be a personal service provider.

A personal service provider refers to any company, CC or trust that provides a service to you by using a person who’s personally connected to your company, CC or trust.

Those were 3 requirements you must meet in determining whether or not you’re an SBC.

The above was just a brief, and general, overview of the requirements. There are still many more specific and critical details regarding each of those requirements which you simply have to know.


For more information, contact me for a free consultation.