The South African Small Business Tax Guide 2026/27

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The headline rates

A standard South African company pays income tax at a flat 27%. Smaller businesses can pay less than that through two concessions: Small Business Corporation rates and turnover tax.

Small Business Corporation (SBC) rates

A qualifying SBC pays graduated rates in place of the flat 27%: 0% on the first R95,000 of taxable income, then 7%, then 21%, with 27% only applying above R550,000. On R550,000 of taxable income, that saves tens of thousands of rand each year.

To qualify, broadly: all shareholders must be natural persons (no company or trust shareholders), gross income must be R20 million or less, and the company can't be a personal service provider or hold shares in other companies. Some service businesses are excluded unless they employ enough people. The test is technical, and we check it for you.

Turnover tax for micro-businesses

If your turnover is under R2.3 million (the ceiling rose from R1 million for years of assessment starting 1 March 2026 for individuals and 1 April 2026 for companies), you can elect turnover tax. It is a single tax on turnover that replaces income tax, provisional tax, VAT, capital gains tax and dividends tax. It taxes turnover, so a business with thin margins can pay more under it than under income tax. Compare both figures before you elect.

Provisional tax

If you earn income that isn't fully taxed at source, such as business income, you're a provisional taxpayer. That means estimating your year's income and paying tax in two instalments: for a February year-end, by 31 August and end February, with an optional third top-up around end September to stop interest running on any shortfall. Underestimate badly and SARS adds penalties; skip it entirely and the penalties compound. Base each estimate on up-to-date management accounts.

The new VAT threshold

From 1 April 2026, compulsory VAT registration applies from R2.3 million of taxable supplies in 12 months (previously R1 million), and voluntary registration opens at R120,000. If you registered under the old threshold, deregistering cuts your admin but ends your input VAT claims. If your customers are VAT vendors, staying registered keeps your input VAT claims at no cost to them. If they're consumers, deregistering lets you lower prices or keep the VAT as margin. See our VAT registration guide for the full picture.

Choosing your tax regime

SBC rates, turnover tax, the VAT election and the accuracy of your provisional tax estimates all change your tax bill. Two businesses with the same profit can pay different amounts of tax because of these choices. We compare the SBC rates, turnover tax and the standard company rate on your own figures before you choose.

Common questions

Do I qualify as a Small Business Corporation?

Broadly: all shareholders are natural persons, gross income is R20 million or less, the company isn't a personal service provider and doesn't hold shares in other companies. Some professional service companies are excluded unless they employ three or more unconnected full-time staff. We check this as standard for every company client.

Is turnover tax cheaper than normal tax?

Sometimes. It replaces five taxes with one, which cuts admin. It taxes turnover, so low-margin businesses can pay more than they would under normal income tax. Compare both figures before electing.

What happens if I get my provisional estimate wrong?

Underestimate by too much and SARS levies an underestimation penalty plus interest on the shortfall. The optional third payment lets you top up before interest accumulates, which helps after a strong final quarter.

Should I deregister for VAT now the threshold is R2.3 million?

It depends who your customers are. If they're VAT-registered businesses, staying registered lets you claim input VAT and costs them nothing. If they're consumers, deregistering could cut your prices by 15% or lift your margin. Work out both before you decide.

The small business tax guide for South Africa