Small Business Corporation (SBC)

Does your Company qualify to be a Small Business Corporation (SBC)?

If the answer if ‘YES’, you will receive numerous Tax Advantages when registering a Pty. 

Definition:

It is a Personal Service Entity that employs at least 3 full time employees, which are at the centre of the company’s operations.

SBC’s are defined in two categories:

The first will include professional or semi-professional enterprise that is in need of a license, qualification, and certificate or be part as a member of a professional body to be able to practice. These will include industries such as:

–        Law
–        Health
–        Education
–        Accounting
–        Architecture
–        Engineering
–        Real Estate

The latter category are comprised of the following:

–        Commercial Arts
–        Broadcasting
–        Entertainment
–        Sports

What is the benefit of SBC?

1. Tax-Breaks:

A new company can benefit tremendously due to tax-breaks. This is especially helpful since a new business can struggle with cash flow problems. SBC qualifies for Capital gains Tax relief.

2. Depreciation allowance:

Apart from the above mentioned tax-breaks, an SBC can qualify for faster wear and tear (depreciation) allowance.

Please take the time to go and see a Tax professional or an experienced lawyer, accountant or Chartered Accountant, that is well versed in the Income Act, to help navigate you and your business through certain structures to gain all of the benefits.

 

Principles for a SBC

1. According to the Income Act a Small Business Corporation (SBC) can be a Co-Operative, Close Corporation or Pty.
2. The gross income must not be above R20 million per year.
3. It needs to qualify for the following requirements:

–        Not more than 20% of the gross income and capital gains must subsist of income from investments (interest, rentals, royalties, marketable securities, fixed property trading and dividends) or professional services rendered.

–        No shareholder may be a company or corporation, it must be a natural person.

–        Shareholders are prohibited from having shares in another Company/ Closed Corporation.