South African companies are taxed on one of three bases, and which one applies can make a big difference to a small business's tax bill.
Ordinary companies: 27%
A company pays income tax at a flat 27% of its taxable income for years of assessment ending between 1 April 2026 and 31 March 2027, unchanged from the year before. There's no tax-free amount: a company with R1,000,000 of taxable income pays R270,000.
Small business corporations
A small business corporation (SBC) pays less on its first R550,000. For years ending 1 April 2026 to 31 March 2027:
| Taxable income | Tax |
|---|---|
| Up to R99,000 | 0% |
| R99,001 – R365,000 | 7% of the amount above R99,000 |
| R365,001 – R550,000 | R18,620 + 21% of the amount above R365,000 |
| Above R550,000 | R57,470 + 27% of the amount above R550,000 |
On R450,000 that's R18,620 + 21% × R85,000 = R36,470, against R121,500 at 27%.
To qualify (section 12E), the company must, among other things:
- be a private company, close corporation or co-operative;
- be owned entirely by individuals (natural persons) throughout the year;
- have gross income of no more than R20 million (less for a part year);
- earn no more than 20% of its income from investments and personal services together; and
- not be a personal service provider.
The shareholders also generally mustn't hold shares in other companies, with exceptions such as listed shares. SARS's Interpretation Note 9 sets out the detail.
Turnover tax for micro businesses
A micro business can choose turnover tax, a simple tax on what it takes in rather than on profit. From 1 April 2026 the turnover limit is R2.3 million a year, as announced in Budget 2026. For the year 1 March 2026 to 28 February 2027:
| Taxable turnover | Tax |
|---|---|
| Up to R600,000 | 0% |
| R600,001 – R950,000 | 1% of the amount above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% of the amount above R950,000 |
| Above R1,400,000 | R12,500 + 3% of the amount above R1,400,000 |
It suits businesses with healthy margins and simple affairs; a business with thin margins may pay less on profit.
Try the three side by side in our company tax calculator.
Sources
- SARS: Companies, trusts and small business corporations: rates
- SARS: Turnover tax rates
- SARS: Interpretation Note 9, small business corporations
- SARS: Budget 2026 frequently asked questions
This is general information, not tax, legal or financial advice.