Don't assume your SMME automatically qualifies for the tax incentives enjoyed by small business corporations!


Read on to find out why you should ensure your SMME also qualifies as a small business corporation so that you can DOUBLE your tax benefits.

SBCs have more tax benefits than SMMEs

Small, medium and micro enterprises (SMMEs) aren’t the same as small business corporations (SBCs). The obvious differences include:

The most important difference is the different tax benefits they enjoy

SBCs benefit from special tax rates and accelerated allowances in the Income Tax Act, whilst SMMEs benefit from having certain amounts/grants exempted from tax.

Youʼll only be an SBC if you meet the following requirements Your company has to meet all the following requirements before it can qualify as an SBC (Section 12E of the Income Tax Act):

1. Ownership requirements

It must be a close corporation, any private company registered under the Companies Act, a co-operative or a society AND:

These are only 3 limitations when qualifying for small business tax benefits but there are another 6 that you need to know.
 

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An amendment was introduced, allowing for circumstances where a new business is setup using shelf close corporations or companies (close corporation or company was already registered by someone else that then sells that corporation or company to you).

2. Turnover requirements

Remember: When you start trading during a tax year, you must calculate the annual equivalent to determine whether your turnover would have exceeded R20 million had you traded for the full tax year.

3. Business activity requirements

• The company can’t be a personal service provider (Fourth Schedule).

Definition: Personal service provider

Any company or trust, where any service rendered on behalf of the company or trust to a client is rendered personally by a connected person (this includes a member or shareholder of the company or CC or any relative of the shareholder or member), and

• such person would be regarded as an employee of the client if the service was rendered directly to the client; or

• where those duties must be performed mainly at the premises of the client, the person, company or

 

Caution: A company or trust can’t be a personal service provider where the company or trust throughout the year of assessment employs three or more full-time employees who are not shareholders, members or connected persons.

As a small business you cannot afford to miss out on these tax benefits. In the Practical Tax Handbook goes into full detail about how and why small business corporations can have greater tax benefits.

Take advantage of these tax saving opportunities by ordering the Practical Tax Handbook  now!

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The full subscription is valued at only R2 997…. which is a pittance, compared to the tax savings you’ll make within a few months.

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Kind regards,

Natalie Cousens

Managing Editor, The Practical Tax Loose Leaf

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