Small Business Corporations (SBC) in South Africa: Who Qualifies, What You Save on Tax, and How We Help (2025/26)
- Rico de Villiers
- Aug 15
- 4 min read
For many owner-managed companies, electing (and maintaining) Small Business Corporation (SBC) status is one of the most valuable tax optimisations available in South Africa. Instead of paying the flat 27% corporate income tax, a qualifying SBC is taxed on a graduated (marginal) scale with a significant zero-rated band.
The Small Business Corporation (SBC) tax benefit at a glance (years ending 1 Apr 2025 – 31 Mar 2026)
R0 – R95,750: 0%
R95,751 – R365,000: 7% of the amount above R95,750
R365,001 – R550,000: R18,848 + 21% of the amount above R365,000
Over R550,000: R57,698 + 27% of the amount above R550,000
What does that mean in rands?
At R300,000 taxable income: ≈ R14,298 SBC tax vs R81,000 at 27% (saving ≈ R66,703).
At R600,000: ≈ R71,198 SBC tax vs R162,000 (saving ≈ R90,802).
At R1,000,000: ≈ R179,198 SBC tax vs R270,000 (saving ≈ R90,802; the saving plateaus once you exceed R550,000).(Computed from SARS’ 2025/26 SBC table and 27% company rate.)
Who can qualify as an SBC?
To qualify, all of the following must be true for the year of assessment (tested annually):
Legal form: You are a private company, close corporation, personal liability company, or co-operative. (Trusts, partnerships and sole proprietors do not qualify for SBC.)
Natural-person owners: All shareholders/members are natural persons throughout the year.
No “other company” shareholdings: None of the shareholders/members may hold shares/interests in any other company, except for specific permitted holdings (e.g., listed companies, collective investment scheme portfolios/REITs, body corporates/share-block/associations, certain co-operatives and similar carve-outs). This is a common disqualifier.
Gross income ≤ R20 million for the year (pro-rated if you traded for less than 12 months—SARS treats part-months as full months when scaling the limit).
“Tainted income” cap (the 20% rule): Not more than 20% of the total receipts and accruals (excluding capital) plus all capital gains may consist collectively of investment income (e.g., interest, dividends, rentals, royalties, annuities) and income from rendering a “personal service” (as defined).
Not a Personal Service Provider (PSP): You must not be a PSP under the Fourth Schedule.
Personal-services nuance: Where your trade is a “personal service” (e.g., certain professional services), SBC relief can still apply if you employ three or more full-time, unconnected employees directly engaged in the service, and the service is not performed by a person who holds an interest in the company. This is where structuring and staffing matter.
Beyond the rate cut: accelerated write-offs for assets
SBCs also enjoy accelerated capital allowances that boost early-year cash flow:
Manufacturing plant & machinery used directly in a manufacturing (or similar) process: 100% deduction in the year first brought into use.
Other depreciable assets acquired on/after 1 April 2005: may elect 50% / 30% / 20% over three years (or normal wear-and-tear under s11(e)).
Typical pitfalls we fix before they cost you SBC status
Share register traps: A shareholder innocently holds a few shares in a (non-listed) private company—this can disqualify the SBC. We audit owners’ holdings and restructure where appropriate using the permitted exceptions.
Crossing the 20% “tainted income” line: Excess interest/rentals or personal-service income can push you over 20%. We model revenue streams and staffing to keep you compliant (or advise when SBC is not optimal).
Pro-rata gross-income limit in short years: Starting mid-year? Your R20m cap is scaled down—easy to miss on first-year assessments.
PSP risk misdiagnosis: Confusing “personal service” with “personal service provider” can lead to wrong conclusions on eligibility and PAYE treatment. We review both tests in your context.
SBC vs Turnover Tax (micro-businesses)
Small Business Corporation Tax is not the same as Turnover Tax (for qualifying turnover ≤ R1 million). Turnover Tax replaces multiple taxes with a simplified levy on turnover; SBC is a normal CIT regime with preferential rates and allowances. The right choice depends on your margins, growth plans, VAT profile and administrative needs.
How Novum Group helps you navigate (and keep) SBC status
Our tax and accounting team (Novum Tax Masters & Novum Accounting Masters) works with SMEs and professional practices daily. We provide:
Eligibility & structuring review: Shareholder checks (including permitted holdings), gross-income modelling, PSP and personal-services analysis. South African Revenue Service+1
Year-by-year monitoring: SBC status is assessed annually. We track th
e 20% cap, pro-rata income limit (short years), and ownership changes.
Capital allowance planning: We time asset acquisitions and elections (100% manufacturing write-off or 50/30/20) to maximise cash-flow relief.
Return preparation on eFiling (ITR14): Correct SBC disclosures and supporting schedules to withstand SARS scrutiny.
Scenario modelling: We quantify tax outcomes (SBC vs 27% flat, and SBC vs Turnover Tax) so you can make evidence-based decisions.
Quick checklist (do you likely qualify?)
All owners are individuals and nobody (owner/member) holds shares/interests in another private company (other than permitted exceptions).
Your gross income ≤ R20m (or the pro-rated cap if you traded <12 months).
Investment + personal-service income ≤ 20% of total receipts/accruals + all capital gains.
You’re not a PSP; and if you provide personal services, you employ ≥ 3 full-time, unconnected staff directly in that service.
Final word
Handled correctly, SBC status can deliver recurring tax savings up to ~R90,802 per year (at taxable incomes ≥ R550,000), plus faster write-offs on assets—powerful levers for growth-stage businesses. If you’re unsure about any of the tests, or you think your structure might be on the edge, let’s review it before year-end so you don’t leave money on the table—or fall foul of a technicality.
You can book a free consultation below or click here to contact us or request a call back,
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