The South African tax for corporate companies is a bit high, although not as high as some countries. This is a guide on how to reduce company tax in South Africa.
The South African Revenue Service is a bit lenient to micro businesses; you don’t have to pay taxes until you make a certain amount of money. Even then; you can qualify for a tax turnover, which is for businesses making less than R1million per year.
Apply for turnover tax
This tax was made specifically for microbusinesses; to make it easier for them to meet their tax obligations. It replaces a lot of taxes like capital gains tax, VAT, provisional tax and Income tax. Businesses with a turnover of R335 000 or less don’t have to pay any tax.
Companies with a turnover of more than R335 000 but make R500 000 or less will only pay 1% of tax on each R1 above R335 000. Here is a complete list for other brackets. Almost all forms of ownership qualify for a turnover tax, namely sole proprietors, partnerships, close corporations, companies and co-operatives. You have to register for turnover tax with SARS.
Spend money before your financial year end
Another way to significantly reduce your tax burden is to spend the money that your business makes before declaring it as profit. Businesses are taxes on profits, not on income, profits are declared at the end of the financial year of the business. All you have to do is to spend this money on your business and declare very little profits at the end.
Buy equipment, deduct travel expenses, buy food from wholesalers like Makro. Don’t wait until you declare the profits, then using the profits to reinvest into your business, use the money to reinvest. Some people also deduct personal expenses from the business, this may be viewed as unethical in some spaces.
For example, someone might get the company to pay their rent, buy a car and register it as a company asset. This is ideal if the business is totally owned by you, then you can just own personal things through the company.
This was a guide on how to reduce company tax in South Africa. Do you have any thoughts or questions? Comment below.