The South African Revenue Service (Sars) offers a range of tax incentives and relief measures aimed at supporting the growth and sustainability of small to medium-sized enterprises (SMMEs).

These measures are designed to reduce the financial burden on SMMEs and promote economic development, job creation, and investment.

Morné Janse van Rensburg, managing director of tax specialist firm, Hobbs Sinclair Advisory, said the importance of these incentives for small businesses, emphasising the need for their adoption.

"Surprisingly, many business owners are not aware of all the tax incentives available to them or do not put in the minor effort to make use of them. What may seem like a laborious exercise can be well worth it," he stated.

"It is often beneficial to reach out for professional assistance, which can pay for itself tenfold through the tax savings made."

Small Business Corporation (SBC) tax rates

Small Business Corporations (SBCs) will benefit from no income tax on the first R95,750 of taxable income, with progressive tax rates applied to income above this threshold. This offers a significant reduction in the overall tax burden compared to standard corporate tax rates.

Turnover tax

Turnover Tax is a simplified tax system only available to sole proprietors, partnerships, companies, or close corporations with a “qualifying turnover” of less than R1m per year. These types of entities are called micro businesses.

Turnover tax is calculated against the turnover of a business, as opposed to a percentage of profit which reduces the administration burden on business owners as there is less of a need to keep a detailed record of expenses and to work out or construct which are deductible for tax purposes.

Registered turnover taxpayers are also exempt from Dividend Withholding Tax (DWT) on dividend distributions of up to R200,000 per year. Dividends in excess of R200,000 are subject to DWT at the standard rate of 20%.

Employment Tax Incentive (ETI)

To encourage the employment of young job seekers aged 18 to 29, the ETI allows employers to reduce their PAYE (Pay-As-You-Earn) liabilities. This incentive can be claimed for up to 24 qualifying months per employee, effectively reducing the cost of hiring young talent.

Urban Development Zone (UDZ) allowance

The UDZ tax allowance offers accelerated depreciation for capital investments in designated urban development zones, promoting investment and economic development in these areas.

Learnership Allowance

Employers engaged in learnership agreements with employees can claim additional deductions, fostering skills development and training within businesses.

In closing, Janse van Rensburg commended the revenue service, saying, "Sars’ tax incentives offer a significant step-up towards fostering a more supportive environment for SMMEs.

By reducing the financial strain and encouraging investment, these measures will help small businesses thrive and contribute to the overall economic growth of South Africa."

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