How company income tax is worked out
A South African resident company pays income tax on its taxable income for each year of assessment, which is its financial year. Taxable income starts with gross income, takes off exempt income, then subtracts the expenses incurred in producing that income, capital allowances such as wear-and-tear, and any assessed loss carried forward. A company that is not an SBC pays a flat 27% on the result, from the first rand. There is no tax-free threshold and no rebate.
Accounting profit and taxable income are rarely the same number. Depreciation in the financial statements is replaced by SARS allowances, fines and most entertainment are not deductible, and some income is taxed when it accrues rather than when it is received. If you are working from the income statement, the net profit calculator and the depreciation calculator help with the first steps.
Small business corporation tax table for 2026/27
These rates apply to qualifying companies with years of assessment ending from 1 April 2026 to 31 March 2027. The 0% band moved from R95,750 to R99,000 in Budget 2026, in line with the individual tax threshold.
| Taxable income | Rate of tax |
|---|---|
| R1 to R99,000 | 0% of taxable income |
| R99,001 to R365,000 | 7% of taxable income above R99,000 |
| R365,001 to R550,000 | R18,620 + 21% of taxable income above R365,000 |
| R550,001 and above | R57,470 + 27% of taxable income above R550,000 |
Above R550,000 every extra rand is taxed at 27%, the same as a standard company, so the SBC benefit stops growing there. The most an SBC can save against the standard rate is R91,030 a year.
Standard rate against SBC rates
| Taxable income | Standard company | SBC | SBC saving | SBC effective rate |
|---|---|---|---|---|
| R100,000 | R27,000 | R70 | R26,930 | 0.1% |
| R250,000 | R67,500 | R10,570 | R56,930 | 4.2% |
| R365,000 | R98,550 | R18,620 | R79,930 | 5.1% |
| R550,000 | R148,500 | R57,470 | R91,030 | 10.4% |
| R1,000,000 | R270,000 | R178,970 | R91,030 | 17.9% |
| R2,000,000 | R540,000 | R448,970 | R91,030 | 22.4% |
| R5,000,000 | R1,350,000 | R1,258,970 | R91,030 | 25.2% |
Who qualifies as a small business corporation
Section 12E of the Income Tax Act sets the tests, and SARS explains them in Interpretation Note 9. They have to be met afresh every year of assessment, so a company can be an SBC one year and not the next.
- The company is a private company, close corporation, co-operative or personal liability company.
- Every shareholder or member is a natural person, at all times during the year.
- No shareholder holds shares in another company, apart from listed shares, collective investment schemes and the other exceptions SARS lists.
- Gross income for the year is no more than R20,000,000, reduced pro rata if the company traded for less than 12 months.
- Investment income and income from personal services together make up no more than 20% of receipts and capital gains.
- The company is not a personal service provider. A company rendering personal services can still qualify if it employs three or more full-time employees, who are not shareholders, throughout the year.
An SBC also gets faster write-offs on assets: 100% in the first year on plant and machinery used in manufacturing, and the choice of 50%, 30% and 20% over three years on other depreciable assets.
Turnover tax for micro businesses
Turnover tax is a simpler regime for very small businesses. Instead of tax on profit, the business pays a low rate on its taxable turnover, and the one return replaces income tax, provisional tax, capital gains tax and dividends tax for the business. Sole proprietors, partnerships, companies and close corporations can register, provided turnover for the year is no more than R2,300,000.
| Taxable turnover | Rate of tax |
|---|---|
| R1 to R600,000 | 0% of taxable turnover |
| R600,001 to R950,000 | 1% of taxable turnover above R600,000 |
| R950,001 to R1,400,000 | R3,500 + 2% of taxable turnover above R950,000 |
| R1,400,001 and above | R12,500 + 3% of taxable turnover above R1,400,000 |
The table applies to years of assessment from 1 March 2026 to 28 February 2027. A business is excluded if it holds shares in unlisted companies, earns more than 20% of receipts from professional services (or, for a company, from investment income and professional services), is a personal service provider or labour broker, or sold business assets for more than R1,500,000 over three years.
| Turnover | Turnover tax | Share of turnover |
|---|---|---|
| R600,000 | R0 | 0.00% |
| R800,000 | R2,000 | 0.25% |
| R1,000,000 | R4,500 | 0.45% |
| R1,400,000 | R12,500 | 0.89% |
| R1,800,000 | R24,500 | 1.36% |
| R2,300,000 | R39,500 | 1.72% |
Worked example: one company, three regimes
A (Pty) Ltd owned by two individuals has turnover of R2,000,000 and taxable income of R800,000. As a standard company it pays R800,000 × 27% = R216,000. If it meets the SBC tests, the table gives R57,470 plus 27% of the R250,000 above R550,000, which is R124,970, an effective rate of 15.6%. On turnover tax it would pay R12,500 plus 3% of the turnover above R1,400,000: R30,500, or 1.52% of turnover. With a 40% margin, turnover tax is the cheapest of the three. At a 10% margin, taxable income would be R200,000 and the SBC bill only R7,070.
After company tax: getting money out
Profit left after company tax is not yet the owner's money. Dividends paid to individual shareholders carry 20% dividends tax, withheld by the company, so the combined rate on profit paid out as a dividend by a standard company is about 41.6%. Salary is deductible for the company but taxed in your hands under PAYE. The salary vs dividend calculator compares the two, and the dividends tax calculator works out the withholding on a declared dividend.
Paying company tax during the year
Companies are provisional taxpayers. The estimate from this calculator is the starting point for the two provisional payments: the first within six months of the start of the year of assessment and the second by its last day, with an optional top-up afterwards. The provisional tax calculator splits an annual estimate into those payments, and the SARS deadline checker lists the dates.
Frequently asked questions
What is the company tax rate in South Africa for 2026/27?
27% of taxable income for years of assessment ending on any date from 1 April 2026 to 31 March 2027. Budget 2026 left the rate unchanged. It was cut from 28% to 27% for years of assessment ending on or after 31 March 2023.
How much tax does a small business corporation pay?
Nothing on the first R99,000 of taxable income, 7% on the next slice to R365,000, 21% from there to R550,000, and 27% above that. A qualifying company with R800,000 taxable income pays R124,970, against R216,000 at the standard rate.
Can my company be an SBC if another company owns shares in it?
No. Every shareholder or member must be a natural person for the whole year of assessment. A company held through a family trust or a holding company does not qualify, and nor does one whose shareholders hold shares in other private companies, apart from the exceptions SARS lists in Interpretation Note 9.
What changed for turnover tax in 2026?
From 1 April 2026 the turnover limit rose from R1 million to R2,300,000 and the 0% band from R335,000 to R600,000, the first change to the table since 2009. SARS also announced that the rule tying a company on turnover tax to a 28 February year end falls away.
Is turnover tax better than SBC tax?
It depends on your margin. Turnover tax is charged on receipts, so a business with high costs can pay more than it would on profit. On R2,000,000 of turnover the tax is R30,500. If the same business made R800,000 profit as an SBC, it would pay R124,970, so turnover tax wins here. A business with a 5% margin would see the opposite.
Does a company on turnover tax still pay VAT?
A micro business can choose to register for VAT while on turnover tax, and must register once its taxable supplies pass the compulsory VAT threshold. Turnover tax replaces income tax, provisional tax, capital gains tax and dividends tax for the business, within the rules of the Sixth Schedule.
Is the tax on this page what my company will be assessed on?
Only if the taxable income you enter is right. Taxable income is the figure after exempt income, allowable deductions, capital allowances and any assessed loss brought forward, and it usually differs from accounting profit. Treat the result as an estimate until your ITR14 is prepared.