Small Business Corporation (SBC) Tax in South Africa: Who Qualifies and 2026/27 Rates
Tax & SARS compliance
Checked against SARS and the Income Tax Act on 1 November 2026. Rates and rules change; check the SARS pages linked below before you file.
By Morné Kruger, Founder & SA Tax Editor. Last reviewed 2026-11-07.
Try the numbers for your company in our SBC tax calculator.
SBC tax rates for 2026/27
These are the rates announced in Budget 2026 for years of assessment ending on any date from 1 April 2026 to 31 March 2027.12 A company with a February 2027 year-end uses this table. Bill B34-2026, which puts them into law, hasn't been passed yet, so they could still change.6
| Taxable income | Tax |
|---|---|
| R0 – R99 000 | 0% of taxable income |
| R99 001 – R365 000 | 7% of the amount above R99 000 |
| R365 001 – R550 000 | R18 620 + 21% of the amount above R365 000 |
| R550 001 and above | R57 470 + 27% of the amount above R550 000 |
Previous year (years of assessment ending 1 April 2025 to 31 March 2026):15
| Taxable income | Tax |
|---|---|
| R0 – R95 750 | 0% of taxable income |
| R95 751 – R365 000 | 7% of the amount above R95 750 |
| R365 001 – R550 000 | R18 848 + 21% of the amount above R365 000 |
| R550 001 and above | R57 698 + 27% of the amount above R550 000 |
The ordinary company rate is 27% for years ending 1 April 2026 to 31 March 2027.1
Worked examples: SBC rates vs 27%
Using the 2026/27 table announced in Budget 2026:1
| Taxable income | SBC tax | Tax at 27% | Difference |
|---|---|---|---|
| R99 000 | R0 | R26 730 | R26 730 |
| R300 000 | R14 070 | R81 000 | R66 930 |
| R500 000 | R46 970 | R135 000 | R88 030 |
| R1 000 000 | R178 970 | R270 000 | R91 030 |
How the R500 000 line works: the first R99 000 is taxed at 0%. Up to R365 000, tax is a fixed R18 620. The R135 000 above R365 000 is taxed at 21%, which is R28 350. Total: R46 970.
Above R550 000, every extra rand is taxed at 27%, the same as any other company. That's why the difference levels off at about R91 000 a year.
Illustration only. These figures use the 2026/27 table as announced in Budget 2026, which could still change before the Bill is passed, and assume the company qualifies for the whole year. They aren't advice for your company.
Does your company qualify? The six tests
Every test must be met for the whole year of assessment. Fail one, even for one day, and the company is taxed at 27% for that year.3
- Is it a South African-incorporated CC, co-operative, private company or personal liability company? No → Taxed at 27%
- Is every share or member's interest beneficially held by natural persons all year? (A trust counts only if natural-person beneficiaries hold a vested right.) No → Taxed at 27%
- Does any shareholder hold shares in another company, other than permitted holdings, at any time in the year? Yes → Taxed at 27%
- Is gross income R20 million or less, pro rata for a short year? No → Taxed at 27%
- Are investment income plus personal-service income 20% or less of receipts? No → Taxed at 27%
- Is it a personal service provider? Yes → Taxed at 27%
SBC rates apply for this year
1. Entity type
The company must be a close corporation, a co-operative, a private company or a personal liability company.3 A public company, a trust or a sole proprietor can't be an SBC.
It must also be incorporated in South Africa. A company registered under foreign law doesn't qualify, unless it has moved its registration to South Africa under the Companies Act.34
2. Natural-person shareholders
All shareholders or members must be natural persons throughout the year.3 If another company holds even one share at any point in the year, the company doesn't qualify for that year. The same goes for shares held by a trust, unless natural-person beneficiaries hold a vested right in those shares for the whole year; most discretionary family trusts don't meet that test.3
3. Shares in other companies (the one-day trap)
No shareholder or member may hold shares in any other company at any time during the year, unless the holding is one of the permitted kinds.3 SARS's Interpretation Note 9 lists permitted holdings that include:3
SARS's Budget 2026 FAQ also says an SBC must not be "a holding company".2 The section 12E definition, as quoted in Interpretation Note 9 (Issue 7), has no test in those words.3 If your company holds shares in another company, check the position with your tax practitioner.
- shares in listed companies;
- participatory interests in collective investment schemes (unit trusts);
- less than 5% of a social, consumer or burial co-operative, or of a primary savings or savings-and-loans co-operative bank;
- shares in a body corporate, a share block company or a similar association formed only to manage its members' common interests (a homeowners association, for example);
- a friendly society;
- an approved section 12J venture capital company;
- shares in a company that has never traded and never held assets worth more than R5 000; and
- shares in a company that is taking steps to deregister or liquidate.
If a shareholder holds a non-permitted share even for one day in the year, the company loses SBC status for that year.3 A common example: the owner has a second Pty Ltd that trades. Neither company qualifies.
The list above is from SARS's 2018 Interpretation Note. Check the current section 12E(4) before relying on it.
4. Gross income of R20 million or less
Gross income for the year must not exceed R20 million.3 If the company traded for less than 12 months (for example, its first year), the limit is reduced in proportion, and a part-month counts as a full month.3 So a company that traded for 6 months and a few days counts 7 months, and its limit is R20 million × 7/12.
5. The 20% investment and personal-service income test
Investment income plus income from personal services must be 20% or less of the company's total receipts and accruals (excluding capital receipts) plus its capital gains.3
- Investment income includes dividends, royalties, rental from immovable property, annuities, interest and income from trading in financial instruments.3 Short-term serviced accommodation, such as a guesthouse or B&B, generally isn't treated as rental here.3
- Personal service means services in listed fields, including accounting, consulting, engineering, IT, law, health and management, performed by a shareholder or someone connected to them.3
- The 3-employee exception (this test only, section 12E(4)(d)(ii)): personal-service income doesn't count towards the 20% if the company employs 3 or more full-time employees, who aren't shareholders or connected to them, in that service throughout the year.3
So a one-person consulting company with two staff usually fails this test. Whether your staff and services meet the exception depends on the facts, so check with your accountant.
6. Not a personal service provider
The company must not be a personal service provider as defined in the Fourth Schedule.3
This is separate from the 3-employee exception in test 5, which applies to the 20% test only (section 12E(4)(d)(ii)). The Fourth Schedule definition looks at whether the person would be an employee of the client, whether the work is mainly done at the client's premises under its control or supervision, and whether more than 80% of income comes from one client. It has its own exception for three or more full-time employees who are not connected persons.3
Accelerated write-offs for SBCs
On top of the lower rates, an SBC can write off assets faster:3
- Manufacturing plant and machinery: 100% in the year it's brought into use (section 12E(1)).
- Other depreciable assets: by election, 50% in year one, 30% in year two and 20% in year three (section 12E(1A)), instead of normal wear and tear.
See our depreciation calculator for straight-line comparisons.
Claiming SBC on the ITR14
The company's ITR14 asks: "Is the company a Small Business Corporation as defined in s12E?"4 Answer it for each year based on the six tests.
Don't confuse this with the ITR14's "Small Business" classification (assets up to R10 million and gross income up to R20 million). SARS says this classification isn't the same as SBC status.4 SARS also says signed annual financial statements are compulsory for the "Small Business" and larger ITR14 categories.4
Companies are provisional taxpayers too, so the SBC table also matters for your provisional tax estimates. See our provisional tax deadlines guide.
SBC vs turnover tax vs standard company tax
| SBC rates | Turnover tax | Standard company rate | |
|---|---|---|---|
| Taxed on | Taxable income (profit) | Turnover | Taxable income (profit) |
| 2026/27 rates (SBC as announced in Budget 2026) | 0% / 7% / 21% / 27%1 | 0% to R600 000, then 1%, 2%, 3% bands2 | 27%1 |
| Size limit | Gross income up to R20 million3 | Turnover up to R2.3 million (Budget 2026 figure, from 1 April 2026; check enactment)2 | None |
| Who it suits | Qualifying small companies with natural-person owners | Very small businesses that qualify for the regime | Everyone else |
Turnover tax bands for 2026/27 (Budget 2026 figures, subject to enactment):2 0% up to R600 000; 1% of turnover above R600 000; R3 500 + 2% above R950 000; R12 500 + 3% above R1 400 000. Turnover tax has its own qualifying rules, so check them before you compare.
Because turnover tax is charged on turnover and SBC tax on profit, which costs less depends on your margins. Run both in our SBC tax calculator and turnover tax calculator, and compare with the company tax calculator.
Common ways companies lose SBC status
- A trust whose beneficiaries don't have a vested right in the shares, or another company, takes up shares during the year.
- A shareholder holds shares in a second trading company, even briefly.
- A consulting, IT or professional company earns most of its income from the owner's own work and has fewer than 3 qualifying full-time staff.
- Rental, interest or dividend income grows past 20% of receipts.
- Gross income passes R20 million, or the pro rata limit in a short first year.
FAQ
What is a small business corporation in South Africa?
What are the SBC tax rates for 2026/2027?
Who qualifies for SBC tax rates?
Can a company owned by a trust be an SBC?
Can I own shares in another company and still qualify?
Does a consulting or IT company qualify as an SBC?
What is the 20% investment income rule?
What is the SBC turnover limit?
Is SBC better than turnover tax?
How do I claim SBC rates on the ITR14?
What accelerated depreciation can an SBC claim?
Related
Sources
- SARS, Companies, Trusts and Small Business Corporations (SBC) tax rates. https://www.sars.gov.za/tax-rates/income-tax/companies-trusts-and-small-business-corporations-sbc/ (checked 7 Nov 2026)
- SARS, Budget 2026 Frequently Asked Questions (updated 12/08/2026). https://www.sars.gov.za/about/sars-tax-and-customs-system/budget/budget-2026-frequently-asked-questions/
- SARS, Interpretation Note 9 (Issue 7), Small Business Corporations, 25 June 2018. https://www.sars.gov.za/wp-content/uploads/Legal/Notes/LAPD-IntR-IN-2012-09-Small-Business-Corporations.pdf
- SARS, Guide to Complete the Income Tax Return (ITR14) for Companies (updated 29/05/2026). https://www.sars.gov.za/guide-to-complete-the-income-tax-return-itr14-for-companies/
- Rates and Monetary Amounts and Amendment of Revenue Laws Act 3 of 2026, Schedule para 5 (GG 54446, 1 April 2026). https://www.parliament.gov.za/storage/app/media/Acts/2026/Act_3_of_2026_Rates_and_Monetary_Amounts_and_Amendment_of_Revenue_Laws_Act.pdf
- Parliament, Rates and Monetary Amounts Bill B34-2026, para 5 (as introduced in the National Assembly, 21 October 2026). https://www.parliament.gov.za/storage/app/media/Bills/2026/B34-2026_Rates_and_Monetary_Amounts.pdf
- Income Tax Act 58 of 1962, section 5(2), as quoted in "Law by Decree: A critique of section 5(2) of the Income Tax Act" (University of Cape Town). https://open.uct.ac.za/handle/11427/37134
This guide is general information, not tax advice for your company. SBC status depends on your company's facts each year. Speak to a registered tax practitioner before you file.