South African corporate tax refers to annual income tax payable on salaries, commissions, fees etc., by all registered businesses or business owners who are self-employed, in a business, companies or close corporations to the South African Revenue Service (SARS). Generally, local companies are liable to pay South African corporate tax on their worldwide income, and those outside South African borders only pay tax on income earned from within South Africa. What you can claim and how much tax you pay depends on the type and size of your South African business.
Corporate tax applies to numerous companies, including public and private companies, small businesses, corporate bodies, and even dormant companies, as well as sole traders and partnerships. If you qualify as a freelancer or self-employed, you must submit a personal income tax (ITR12) and will be taxed as an individual instead of a business. Partners are taxed individually depending on their share of the profits.
The corporate tax rate is at a flat rate of 28%, but sometimes the public platform speaker does deliver on their promises. It is evident for this year’s corporate or company income tax, which in the 2021 Budget Speech, the minister communicated that the tax rate for tax years ending on or after 31 March 2023 would lower to 27%.
The following are allowed as expenses, and businesses can deduct them from taxable income:
- Capital expenses such as renovations, machinery and tangible assets.
- Business expenses like business rental, office equipment and supplies, admin costs, utilities, marketing, employee costs etc.
- Start-up, operating-driven expenses in the time before the first trading year.
- Net operating losses carried forward from previous operating years.
Credits and incentives are also available for companies paying corporate tax in South Africa, and businesses must register for VAT if their annual turnover surpasses the million-rand mark. Contact us today for advisory services that are tailored and personalised to best suit your tax needs.