Starting a business in South Africa is an exciting venture, but it can be daunting when it comes to taxes. To ensure that your business runs smoothly and you do not run afoul of the law, it is essential to understand the tax obligations that come with starting a business in South Africa.
In this article, we will discuss the tax implications of starting a business in South Africa, including the types of taxes you need to pay, the tax rates, and other important information you need to know.
Business Taxes in South Africa
When you start a business in South Africa, you will be required to register with the South African Revenue Service (SARS) and obtain a tax number.
There are several types of taxes that you will be required to pay as a business owner in South Africa.
Value-Added Tax (VAT)
Value-added tax (VAT) is a tax that is levied on the sale of goods and services in South Africa. The current VAT rate in South Africa is 15%, and it applies to most goods and services.
If your business has an annual turnover of R1 million or more, you will be required to register for VAT.
Corporate Income Tax
Corporate income tax is a tax that is levied on the profits of companies in South Africa. The current corporate income tax rate in South Africa is 28%.
If your business generates a profit, you will be required to pay corporate income tax.
Pay-as-you-earn (PAYE) is a tax that is deducted from the salaries of employees in South Africa.
As an employer, you will be required to deduct PAYE from your employees’ salaries and pay it to SARS on their behalf.
Dividend tax is a tax that is levied on the dividends paid to shareholders of a company. The current dividend tax rate in South Africa is 20%.
Tax Incentives for Small Businesses
The South African government has implemented several tax incentives to encourage small businesses to grow and succeed.
These tax incentives are designed to reduce the tax burden on small businesses and make it easier for them to access funding.
Small Business Corporation Tax
Small business corporations (SBCs) are taxed at a lower rate than other companies in South Africa. The current tax rate for SBCs is 7.5% on the first R750,000 of taxable income.
Employment Tax Incentive (ETI)
The Employment Tax Incentive (ETI) is a tax incentive that is aimed at encouraging employers to hire young and inexperienced workers.
Employers who hire workers aged between 18 and 29 who earn less than R6,500 per month can claim the ETI.
Starting a business in South Africa can be a rewarding experience, but it is important to understand the tax implications involved.
As a business owner, you will be required to pay several types of taxes, including VAT, corporate income tax, PAYE, and dividend tax.
However, there are also tax incentives available to small businesses, such as the Small Business Corporation Tax and the Employment Tax Incentive.
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