Companies pay corporate income tax at 27%, VAT is 15%, and dividends tax is 20%. Two thresholds changed on 1 April 2026 and both matter to smaller businesses: compulsory VAT registration moved from R1 million to R2.3 million, and the turnover tax regime now covers businesses up to R2.3 million with the first R600 000 taxed at nothing.
Tax is the area where small businesses most often lose money without doing anything wrong. Not through avoidance or evasion, but through registering for the wrong thing, missing a provisional payment, or never discovering a regime that would have suited them better.
This is an overview of the taxes that apply to a business, what changed recently, and where the decisions actually sit. It is a guide rather than advice on your own situation, so treat it as the map and let your accountant handle the route.
Corporate income tax
Companies are taxed on taxable income at a standard rate of 27%. Non-resident companies are generally taxed at the same rate on income sourced here.
That rate applies to profit, not turnover, which is worth stating because it is a common misunderstanding. Legitimate business expenses reduce taxable income, which is why proper bookkeeping is worth more than most owners assume.
Smaller companies may qualify for the small business corporation regime instead, which is covered below and is usually the better outcome.
Value added tax
VAT is levied at 15% on the supply of goods and services by registered vendors. Some supplies are zero-rated or exempt.
The threshold changed on 1 April 2026. Compulsory registration now applies once taxable turnover passes R2.3 million in any consecutive twelve month period, raised from R1 million. Voluntary registration is available from R120 000 a year, raised from R50 000.
That is a significant change for growing businesses. A business turning over R1.5 million a year was previously required to register and now is not. Registration is not automatically a bad thing, since a registered vendor claims input VAT on purchases, but it does bring filing obligations and it changes your pricing to consumers. If you are near the threshold, that is a decision to take deliberately rather than by drifting past it.
Turnover tax, the regime most micro businesses miss
Turnover tax is a simplified system for micro businesses and it is consistently overlooked.
Instead of calculating profit, you pay a small percentage of turnover. It replaces income tax, VAT, provisional tax, capital gains tax and dividends tax in one payment, although a business can elect to stay registered for VAT if that suits it.
This also changed on 1 April 2026. Qualifying turnover rose from R1 million to R2.3 million a year, and the tax-free band rose to the first R600 000 of turnover, above which rates step up to a maximum of 3%. The current bands are published on the SARS website and are worth checking against your own numbers.
For a genuinely small operation the administrative saving alone can justify it. It is not always the better answer, particularly if your margins are thin, because you are taxed on turnover whether or not you made a profit. Run both calculations before choosing.
Small business corporation rates
A company that meets the requirements can be taxed on a sliding scale rather than the flat 27%, starting at zero on the lowest band and rising toward 27% on higher income.
The conditions are specific. Broadly, all shareholders must be natural persons holding no other company shares, turnover must stay under a set ceiling, and there are limits on how much income may come from investments or personal services. Many small companies qualify and never claim it, simply because nobody checked.
Ask your accountant directly whether you qualify. It is one of the few questions where a single conversation can change your tax bill materially.
Provisional tax, and the deadline people miss
Companies and most business owners are provisional taxpayers, which means paying tax during the year on estimated income rather than in one amount afterwards.
For a February year end there are two compulsory payments: the first by the end of August, the second by the last business day of February. An optional third top-up payment can be made later to reduce interest where the estimate fell short.
Underestimating carries penalties and interest, so the estimate deserves genuine attention rather than a repeat of last year’s figure. This is the deadline small businesses most often miss, usually because nobody had diarised it.
Pay-as-you-earn and the payroll taxes
If you employ anyone, you must register as an employer and deduct PAYE from salaries, paying it over to SARS monthly with the EMP201 declaration. Rates are progressive, following the individual income tax tables.
Alongside PAYE you deal with UIF contributions, and the skills development levy once your payroll passes the relevant threshold. Employers also submit returns to the Compensation Fund.
Getting payroll wrong is expensive and it is the area where outsourcing pays for itself soonest, because the penalties for late or incorrect submission accumulate monthly.
The employment tax incentive
The employment tax incentive reduces the PAYE you pay over when you employ younger, lower-earning staff who meet the requirements. It costs the employee nothing, since it is a reduction in what the employer remits rather than in what the worker receives.
If you are hiring young people and not claiming it, you are leaving money with SARS that the incentive was designed to leave with you. Check with your payroll provider whether your existing staff already qualify.
Dividends and capital gains
Dividends paid by companies are subject to dividends tax at 20%, generally withheld by the company paying them. Dividends paid to another resident company are usually exempt.
Capital gains tax applies on the disposal of certain assets, with different inclusion rates for individuals, companies and trusts. If you are selling business assets or the business itself, take advice before the transaction rather than after, because the structure of a deal affects the tax and it cannot be restructured once it is done.
What compliance actually requires
Register the company for income tax, register as an employer if you have staff, register for VAT if you cross the threshold or elect to, submit provisional returns, submit the annual return, and keep records that support every figure.
Records are the part that gets neglected. SARS requires supporting documentation to be retained, and a deduction you cannot evidence is a deduction you may lose on review. Keep invoices, bank statements, payroll records and asset registers in order as you go, because reconstructing a year of them in a hurry is how small businesses end up paying more than they owed.
Frequently asked questions
When must a business register for VAT?
Once taxable turnover passes R2.3 million in any consecutive twelve month period, a threshold raised from R1 million on 1 April 2026. Voluntary registration is possible from R120 000 a year.
What is the corporate income tax rate?
27% on taxable income. Companies that meet the small business corporation requirements are taxed on a sliding scale instead, starting at zero on the lowest band.
What is turnover tax and should I use it?
A simplified regime for micro businesses with qualifying turnover up to R2.3 million. It replaces income tax, VAT, provisional tax, capital gains tax and dividends tax, with the first R600 000 of turnover taxed at nothing. It is taxed on turnover rather than profit, so run both calculations before electing.
When is provisional tax due?
For a February year end, the first payment is due by the end of August and the second by the last business day of February, with an optional third top-up afterwards.
Do I pay tax on turnover or profit?
Corporate income tax is charged on taxable income, meaning profit after allowable expenses. Turnover tax is the exception, since it is calculated on turnover regardless of profit.
Further reading
Originally published in December 2023. Updated September 2026. Rates and thresholds change with each Budget, so confirm current figures on the SARS website or with your accountant before you make a decision. This is general information and not tax advice.
