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%. But smaller businesses rarely need to pay the headline rate on everything — the system offers two genuine concessions, and most owners use neither because nobody told them.

Small Business Corporation (SBC) rates

A qualifying SBC pays graduated rates instead 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's a saving worth tens of thousands of rand a year — every 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, but checking it takes us minutes — and getting it right is free money.

Turnover tax for micro-businesses

If your turnover is under R2.3 million (the ceiling rose from R1 million on 1 April 2026), you can elect turnover tax instead: one simple tax on turnover that replaces income tax, provisional tax, VAT, capital gains tax and dividends tax. It's beautifully simple — but it isn't always cheaper, especially for businesses with thin margins, because it taxes turnover rather than profit. It's an election to model, not to guess.

Provisional tax — the deadline that catches everyone

If you earn income that isn't fully taxed at source — which is every business owner — 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. The fix is simply doing the estimate properly, twice a year.

The VAT threshold just moved

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 might simplify your life — or might cost you input VAT you're currently claiming. If your customers are VAT vendors, staying registered usually wins; if they're consumers, the analysis changes. Read our VAT registration guide for the full picture.

What this means practically

Between SBC rates, turnover tax, the VAT election and properly-estimated provisional tax, two identical businesses can pay meaningfully different amounts of tax purely on elections and admin. That's what a good accountant is for — not filing forms, but making sure you're in the right regime in the first place.

Frequently asked questions

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's one simple tax on turnover replacing five others, which is wonderful for admin — but because it taxes turnover rather than profit, low-margin businesses can pay more than they would under normal income tax. Model it 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 exists precisely to top up before interest accumulates — used well, it takes the sting out of 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 effectively cut your prices 15% or lift your margin. It's a calculation, not a default.

The small business tax guide for South Africa