Small Business Tax in South Africa 2025: Complete Guide

By / September 3, 2025

Running a small business in South Africa means juggling sales, staff, suppliers, and—of course—tax. This guide explains the current (2025/26) […]

Small Business Tax in South Africa 2025 Complete Guide

Running a small business in South Africa means juggling sales, staff, suppliers, and—of course—tax. This guide explains the current (2025/26) rules that most small businesses face, highlights what changed in 2025, and gives you practical, numbers-based examples you can apply today. It is written for founders, finance managers, and bookkeepers who want a single, reliable reference you can bookmark and share with your team.

Scope and timing: References below reflect legislation and SARS guidance for years of assessment ending 1 March 2025 – 28 February 2026 (that is, the 2026 year of assessment for individuals and company financial years that fall into 2025/26). Where timing matters (for example, return deadlines), dates are stated explicitly.

1) What actually changed in 2025?

Headline items to note this year:

  • VAT rate proposals were withdrawn. Government proposed a VAT rate increase in March 2025, but this was not implemented. The standard VAT rate remains 15%.
  • Zero-rated food basket proposals were also pulled back. An expansion was floated in March but subsequently reversed/withdrawn during the May budget update.
  • Employment Tax Incentive (ETI) rules were updated from 1 April 2025. The income bands and formulas changed, which is important if you employ young South Africans.
  • SARS refreshed several core guidance notes and tables (for example, small business corporation tax tables, turnover tax tables, ITR14 filing rules and PAYE reconciliation communications). These do not change the “big picture”, but they do matter in the detail.

The rest of this guide walks through the taxes you will encounter and how to stay compliant.

2) Which taxes could apply to a small business?

Most small firms will interact with some or all of the following:

  1. Corporate Income Tax (CIT) – standard company tax at 27%.
  2. Small Business Corporation (SBC) tax – a reduced, progressive scale for qualifying companies with gross income ≤ R20 million and other criteria.
  3. Turnover Tax for Micro Businesses (TOT) – an elective presumptive tax on turnover (not profits) for very small businesses with turnover ≤ R1 million.
  4. Value-Added Tax (VAT) – 15% standard rate; compulsory registration from R1 million of taxable supplies in a 12-month period; optional registration from R50,000.
  5. Payroll taxes – PAYE, UIF (1% employer + 1% employee, up to the monthly ceiling), and SDL (generally 1% once your total payroll exceeds R500,000 in any 12-month period).
  6. Withholding taxes – for example Dividends Tax (20%), interest paid to non-residents (15%), and royalties to non-residents (15%).
  7. Capital Gains Tax (CGT) – for companies, 80% of a capital gain is included in taxable income; at a 27% CIT rate this implies an effective CGT rate of 21.6%.

Choosing the right regime (SBC vs standard company tax vs turnover tax) can change your cash flow dramatically, so spend time on the next three sections.

3) Small Business Corporations (SBC): Do you qualify and what do you pay?

Who can qualify? SBC is a company-level incentive (it does not apply to sole proprietors or partnerships). To qualify, your company must, for the entire year of assessment:

  • Have all shareholders as natural persons (no companies or trusts as owners).
  • Have gross income ≤ R20 million (pro-rata if your year is shorter).
  • Not earn more than 20% of total receipts and accruals from investment income and personal services, unless you employ three or more full-time, unconnected employees in the service business.
  • Not be a personal service provider (unless you meet the three-employee rule above).
  • Be a qualifying juristic person (for example, a private company or close corporation).

2025/26 SBC tax table (year of assessment ending 28/29 Feb 2026):

  • 0% on the first R95,750 of taxable income
  • 7% on the amount above R95,750 up to R365,000
  • R18,900 + 21% on the amount above R365,000 up to R550,000
  • R57,800 + 27% on the amount above R550,000

Worked example (SBC):
A qualifying SBC earns R500,000 taxable income in 2025/26.

  • Tax = R18,900 + 21% × (R500,000 − R365,000)
  • = R18,900 + 0.21 × R135,000
  • = R47,250

If the same company did not qualify and paid standard 27% CIT, tax would be 27% × R500,000 = R135,000.
SBC saving = R135,000 − R47,250 = R87,750.

Extra SBC benefit: accelerated asset write-offs.
SBCs can claim 100% in the year of use for manufacturing plant and machinery, and 50/30/20 over three years for other qualifying assets. These allowances bring tax forward (and therefore reduce cash tax in early years), which can be powerful for growth.

4) Turnover Tax for Micro Businesses (TOT): When does it make sense?

TOT is a simplified, elective system for “micro” businesses with turnover ≤ R1 million. You pay tax on turnover, not profit, at very low rates. It replaces normal income tax and provisional tax, and can sit alongside VAT if you elect to stay in VAT (or you must register for VAT if you hit the compulsory threshold).

2025/26 TOT table (micro businesses):

  • 0% on the first R335,000 turnover
  • 1% of the amount above R335,000 up to R500,000
  • R1,650 + 2% of the amount above R500,000 up to R750,000
  • R6,650 + 3% of the amount above R750,000 up to R1,000,000

Worked example (TOT):
Turnover = R750,000 in the year.

  • TOT = R1,650 + 2% × (R750,000 − R500,000)
  • = R1,650 + 0.02 × R250,000
  • = R6,650

When can TOT be better than SBC/standard company tax?
TOT is often attractive for low-margin traders (for example, resellers) that stay under R1 million turnover, because tax is capped at a few thousand rand. However, TOT can be more expensive if your margins are high, because you cannot deduct expenses in the same way as normal income tax. Run the numbers both ways before you opt in.

VAT with TOT: From 2012, micro businesses may elect to remain in VAT. If your turnover approaches R1 million, remember that VAT registration becomes compulsory even if you are on TOT.

5) Corporate Income Tax (for companies not using SBC or TOT)

If you do not qualify for SBC (or do not opt for TOT), you pay CIT at 27% on taxable income. Two additional items to keep in mind:

  • Assessed-loss limitation rules apply: in a profitable year you may only set off prior-year assessed losses up to the higher of R1 million or 80% of taxable income.
  • Capital Gains Tax for companies: include 80% of a capital gain in taxable income (effective 21.6% at a 27% CIT rate).

These rules can affect cash flow when you return to profit after losses.

6) VAT: Registration, filing cycles, due dates, and pricing basics

  • Rate: Standard rate 15% (no change in 2025).
  • Registration thresholds:
    • Compulsory once you exceed R1 million of taxable supplies in a rolling 12-month period.
    • Voluntary from R50,000 in any 12 months.
  • Tax periods:
    • Category A/B (two-monthly, staggered) – the most common.
    • Category C (monthly) – for larger vendors.
  • Deadlines:
    • If you file manually, returns and payments are due by the 25th of the month following the end of your tax period.
    • If you file via eFiling, the deadline is the last business day of that month.
  • Penalties and interest: Late payment of VAT triggers a 10% penalty plus interest at the prescribed rate. (There is currently no separate penalty merely for late submission of the VAT return; the penalty focuses on late payment.)

Pricing tip: When you quote customers, be clear whether your price is VAT-inclusive or VAT-exclusive. If your competitor quotes R100 excluding VAT and you quote R100 including VAT, you are actually cheaper—but your client may not realise that unless you say so.

7) Payroll: PAYE, UIF, SDL, and ETI (2025 updates)

If you employ staff, register for PAYE, UIF, and (where applicable) SDL.

  • PAYE: Pay As You Earn is employee income tax withheld and paid to SARS.
    • EMP201 returns and payments are due by the 7th of the following month (or the next business day if the 7th falls on a weekend or public holiday).
    • EMP501 reconciliations are due twice a year: the annual reconciliation for 1 March – 28/29 February is due by 31 May, and the interim reconciliation for 1 March – 31 August is typically due by 31 October.
  • UIF: 1% employer + 1% employee, calculated up to the UIF remuneration ceiling (currently R17,712 per month).
    • Worked example (UIF): Employee earns R20,000 p.m. Employer and employee UIF each apply to R17,712: R177.12 employer + R177.12 employee = R354.24 total.
  • SDL: 1% of payroll once your total remuneration exceeds R500,000 in a 12-month period.
  • ETI (Employment Tax Incentive): From 1 April 2025, new rules and income bands apply. If you employ qualifying youth, ETI can reduce PAYE significantly. Ensure your payroll software is updated and your HR/payroll team understands the post-April 2025 calculations.

Penalties: Late or short payments of PAYE, SDL, and UIF generally attract 10% late-payment penalties plus interest, and SARS can levy understatement penalties for incorrect returns.

8) Provisional tax (companies and many owners)

Most companies are provisional taxpayers. The system collects tax during the year based on estimated taxable income:

  • First payment: Six months into your year (for a February year-end, by 31 August).
  • Second payment: At year-end (for a February year-end, by end-February).
  • Optional third/top-up payment: Within six months after year-end (for a February year-end, by 30 September) to reduce interest on any shortfall.

Late payments and significant under-estimates can trigger penalties and interest, so keep your forecasts realistic and update them as the year progresses.

9) Withholding taxes you may encounter

  • Dividends Tax – 20% on dividends paid to shareholders (usually withheld by the paying company unless relief applies under a DTA).
  • Interest paid to non-residents – 15%, subject to exemptions/treaty relief.
  • Royalties paid to non-residents – 15%, subject to DTAs.

If you pay non-resident suppliers or investors, confirm paperwork before you pay (for example, declarations, residency certificates).

10) Record-keeping and audits: how long to retain documents

Under the Tax Administration Act, businesses must keep supporting records for at least five years from the date a return is submitted. If you are under audit or in dispute, keep records until the matter is finalised. VAT vendors must retain tax invoices, credit notes, import/export documents, and related records for five years. Remember that the Companies Act requires some company records for seven years—so many firms simply adopt a seven-year retention policy across the board.

11) Penalties and interest: avoid the “accidental fine”

  • Late payment penalties (for VAT, PAYE, provisional tax, UIF, SDL) are generally 10% of the amount due, plus interest at the SARS prescribed rate.
  • Understatement penalties can range from 10% to 200% depending on behaviour (for example, substantial understatement vs gross negligence vs intentional tax evasion).
  • For micro businesses on turnover tax, under-estimation penalties are specifically provided for if your estimates are too low.

Practical tip: If you discover an error, consider the Voluntary Disclosure Programme (VDP) route where appropriate. It can reduce penalties if you come forward before SARS raises the issue.

12) Putting it together: three quick planning examples

A) Retailer at R850,000 turnover (low margin), no staff yet

  • Option 1: Stay out of VAT until turnover approaches R1 million; consider Turnover Tax (TOT).
    • Estimated TOT at R850,000:
      • R6,650 + 3% × (R850,000 − R750,000) = R6,650 + R3,000 = R9,650 total tax for the year.
    • If margin is 15% (profit ~R127,500), standard 27% CIT would be ~R34,425.
    • TOT likely best until scale/margins improve (watch the VAT threshold).

B) Services firm at R2.4 million revenue, R500,000 profit, three full-time unconnected employees

  • Likely SBC-eligible (check ownership and the 20% investment/personal service cap).
  • SBC tax at R500,000 = R47,250 vs R135,000 at standard 27%.
  • Invest savings into growth; consider accelerated write-offs for equipment and software servers.

C) Manufacturing start-up at R6 million revenue, R300,000 profit, heavy capex

  • If SBC-eligible, consider 100% write-off for manufacturing plant and machinery in the year of first use.
  • This can wipe out taxable income and improve cash flow in year one.
  • If not SBC, use standard manufacturing allowances (for example, 40/20/20/20 for new and unused machinery), and project the cash-tax profile.

13) A compliance calendar you can copy

  • Monthly
    • PAYE/SDL/UIF EMP201 and payment by the 7th (or next business day).
    • VAT (Category C) return and payment by the last business day of the following month (eFiling).
  • Every 2 months
    • VAT (Category A/B) return and payment by the last business day of the following month (eFiling).
  • Twice a year (PAYE)
    • EMP501 interim: by 31 October (covers 1 March – 31 August).
    • EMP501 annual: by 31 May (covers 1 March – 28/29 February).
  • Provisional tax (companies)
    • 1st payment: 6 months into your year (e.g., 31 August for Feb year-end).
    • 2nd payment: at year-end (e.g., end-February for Feb year-end).
    • 3rd (optional): within six months after year-end (e.g., 30 September for Feb year-end).
  • Annual income tax return (ITR14)
    • Due within 12 months after your financial year-end.

14) Practical tips that save real money

  1. Choose your regime deliberately. If your turnover is ≤ R1 million, run a TOT vs SBC vs standard tax comparison. If between R1 million and R20 million, check SBC eligibility first.
  2. Employ youth thoughtfully. The ETI updates from April 2025 can materially reduce your PAYE bill—ensure your payroll configuration is correct.
  3. Time your capex. If you are SBC-eligible and buying equipment, placing assets into use before year-end can accelerate deductions.
  4. Watch the VAT cliff. Monitor rolling 12-month turnover; compulsory VAT registration at R1 million is a legal trigger, not a choice.
  5. Keep immaculate records. Five-year retention is a minimum; seven years is safer given Companies Act obligations. Good records cut audit pain and speed refunds.
  6. Avoid penalties through calendars and automation. Use reminders for the 7th, last business day, 31 May, and 31 October deadlines.
  7. Get treaty and withholding tax paperwork right up front. It is far easier to withhold the correct amount than to fix it later.

15) Frequently asked quick questions (2025 edition)

Is the VAT rate still 15% in 2025?
Yes. Proposals to increase VAT in 2025 were not implemented. The standard rate remains 15%.

What is the compulsory VAT registration threshold?
R1,000,000 of taxable supplies in any rolling 12-month period.

What is the corporate income tax rate?
27% for years of assessment ending on or after 31 March 2023, unchanged for 2025/26.

What is the SBC gross-income cap?
R20 million (pro-rata if your year is shorter).

Can a micro business on turnover tax also be in VAT?
Yes. Micro businesses may elect to remain in VAT (and must register if they hit the compulsory VAT threshold).

How long must I keep records?
At least five years from the date of submission. Many companies keep seven.

Final word

Your tax choices in 2025 are less about headline rate changes and more about structuring, timing, and compliance discipline. The combination of SBC relief, ETI optimisation, capex timing, and clean VAT/PAYE processes will do more for your cash flow than obsessing over rumours of future rate changes. Use the examples above as a template, run the numbers for your own business, and ask your tax practitioner to validate edge cases (for example, personal services, connected persons, or cross-border payments).

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