Small business corporation (SBC) tax requirements come from section 12E of the Income Tax Act 58 of 1962. A qualifying company pays graduated rates instead of the flat 27% company rate: for years of assessment ending 1 April 2026 to 31 March 2027, 0% on the first R99,000 of taxable income, rising to 27% above R550,000.
To qualify, all shareholders must be natural persons for the whole year, gross income may not exceed R20 million, and the company must not be a personal service provider or a holding company. The rest of this page sets out the conditions, the rates and what SARS expects. Confirm your position with SARS before you rely on it.
Business Requirements at a Glance
The section 12E conditions, as set out in the SARS Tax Guide for Small Businesses.
- The entity is a private company, close corporation, co-operative or personal liability company
- Gross income for the year of assessment does not exceed R20 million
- All shareholders or members are natural persons at all times during the year
- No shareholder holds shares or equity in another company, except those allowed by section 12E(4)
- Investment income plus personal service income is not more than 20% of receipts, accruals and capital gains
- The company is not a personal service provider
- The company is not a holding company
- You claim the status through the annual income tax return
The R20 million figure appears in the 2025/26 guide and the SARS Budget 2026 FAQ for 2026/27. If your year is shorter than 12 months, ask SARS whether the limit is pro-rated for a part year.
Registration and Legal Requirements
Status is tested every year. SBC rates apply only if the company qualifies in that year of assessment. The Budget FAQ lists the conditions as natural-person shareholders, gross income of no more than R20 million, not a personal services company and not a holding company.
Personal service nuance. A company that provides personal services can still qualify if it employs three or more full-time employees throughout the year, as section 12E specifies, and the service is not performed by a person who holds an interest in the company.
The shareholding rule. No shareholder may hold shares or equity in another company, apart from the exceptions in section 12E(4). We did not open the full list of those exceptions, so check it with SARS or a registered tax practitioner if a shareholder has other interests.
The alternatives. Normal company tax is 27%. Turnover tax is a separate regime for micro businesses, with a threshold of R2.3 million from 1 April 2026. See the SARS turnover tax page. If you are still setting up, see the company registration requirements.
Documents and Ownership Information Required
- CIPC registration documents and a current company profile
- Certified ID copies for every director, member or partner
- Beneficial ownership information as filed with the CIPC
- A SARS tax reference number for the entity
- Annual financial statements and records of income and expenses
- A shareholders’ or members’ register showing natural persons only
- Payroll records, where the company employs anyone
SARS does not list shareholder confirmations, receipts analyses or a fixed asset register as required documents. They are good practice for showing that you meet the conditions and for supporting the asset write-off, but they are not a SARS requirement.
Tax, Licence and Compliance Requirements
Small business corporation tax rates (2026/27). For years of assessment ending 1 April 2026 to 31 March 2027:
- R0 to R99,000: 0%
- R99,001 to R365,000: 7% of the amount above R99,000
- R365,001 to R550,000: R18,620 plus 21% of the amount above R365,000
- R550,001 and above: R57,470 plus 27% of the amount above R550,000
The 2025/26 table differs (its 0% band ended at R95,750), so use the table for your year of assessment.
Asset write-off. The second concession is an immediate write-off of plant or machinery brought into use for the first time and used directly in a manufacturing or similar process, other than mining or farming. Other depreciable assets acquired on or after 1 April 2005 can use wear-and-tear or an accelerated allowance of 50%, 30% and 20% over three years.
Income tax for small business corporations. Tax is calculated on taxable income using the SBC table, and reported on the ITR14. Companies fall into the provisional tax system automatically. See the SARS provisional tax page.
Other taxes are separate. PAYE, UIF, SDL and VAT follow their own rules. SBC status does not change them.
Process, Deadlines and Ongoing Obligations
A company’s ITR14 return must be submitted to SARS within 12 months after the financial year end, as SARS explains. Provisional tax has two compulsory payments: the first within six months of the start of the year, and the second by the last working day of the year. A third payment after year end is optional.
Check how the ITR14 treats this when you file, including whether SARS applies the SBC rates automatically from the return or you must apply separately.
- Test the conditions before year end, while a shareholding can still be dealt with
- Work out what the graduated rates and the write-off are worth at your profit level
- Compare SBC, normal company tax and turnover tax on your own figures
- Submit the ITR14 within 12 months after year end
- Make the two compulsory provisional tax payments
Frequently Asked Questions
What is small business corporation tax?
It is a set of graduated income tax rates for qualifying small companies, in place of the flat 27% company rate, plus faster write-offs on some assets. The relief comes from section 12E of the Income Tax Act.
What are the small business corporation tax requirements?
All shareholders are natural persons throughout the year, no shareholder holds interests in other companies (subject to section 12E(4)), gross income is no more than R20 million, investment and personal service income is no more than 20% of receipts, and the company is not a personal service provider or holding company.
How is income tax for small business corporations calculated?
Apply the SBC rate table above to taxable income for the year of assessment. Above R550,000 the rate is 27%.
What are the SBC rates for 2026/27?
0% to R99,000, 7% to R365,000, R18,620 plus 21% to R550,000, and R57,470 plus 27% above that.
Which part is more valuable, the rates or the write-off?
It depends on your profit and on whether you buy plant or machinery. Calculate both on your own figures.
When is the return due?
The ITR14 is due within 12 months after the financial year end.
Confirm your eligibility with SARS or a registered tax practitioner. See business and compliance requirements and the company registration requirements.