2020/2021
Tax Guide for Small Businesses
, Tax Guide for Small Businesses
Preface
This guide is a general guide dealing with the taxation of small businesses such as sole
proprietors, partnerships and companies not part of large groups. Some of the discussions in
this guide could, however, be applicable to any type of taxpayer. The aim is to discuss the
typical taxation issues of an average business trading in South Africa.
This guide is not an “official publication” as defined in section 1 of the Tax Administration
Act 28 of 2011 and accordingly does not create a practice generally prevailing under section 5
of that Act. It should, therefore, not be used as a legal reference. It is also not a binding general
ruling under section 89 of Chapter 7 of the Tax Administration Act. Should an advance tax
ruling be required, visit the SARS website for details of the application process.
The information in this guide concerning income tax relates to –
• natural persons for the 2021 year of assessment commencing on 1 March 2020 and
ending on 28 February 2021;
• trusts in respect of years of assessment commencing and ending during the period
commencing on 1 March 2020 and ending on 28 February 2021; and
• companies and CCs with years of assessment ending during the 12-month period
ending on 31 March 2021.
While care has been taken in the preparation of this document to ensure that the information
and the rates published are correct at the date of publication, this document must be read with
the relevant legislation pertaining to that rate, applicable to the tax, customs or excise
concerned.
For income tax purposes, this guide has been updated to include the Tax Administration Laws
Amendment Act 24 of 2020, the Taxation Laws Amendment Act 23 of 2020 and the Rates and
Monetary Amounts and Amendment of Revenue Laws Act 22 of 2020 as well as the Budget
Review of 2020.
For indirect tax purposes, all information has been updated to include amendments up to the
date of the publication of this guide.
Should you require additional information concerning any aspect of taxation, you may –
• visit the SARS website at www.sars.gov.za;
• visit your nearest SARS branch, preferably after making an appointment via the SARS
website;
• have a virtual consultation with a SARS consultant by making an appointment via the
SARS website;
• contact the SARS National Contact Centre–
if calling locally, on 0800 00 7277; or
if calling from abroad, on +27 11 602 2093 (only between 8am and 4:30pm
South African time); or
• contact your own tax advisor or tax practitioner.
Tax Guide for Small Businesses (2020/2021) i
,All guides, interpretation notes, brochures, forms, returns, tables and Government Notices
referred to in this guide are available on the SARS website. Unless indicated otherwise, the
latest issue of these documents should be consulted.
Comments or suggestions on this guide may be emailed to .
Leveraged Legal Products
SOUTH AFRICAN REVENUE SERVICE
Date of 2009 issue : November 2008
Date of 2010 issue : December 2009
Date of 2010/2011 issue : February 2011
Date of 2012/2013 issue : November 2013
Date of 2013/2014 issue : 24 March 2014
Date of 2014/2015 issue : 27 March 2015
Date of 2015/2016 issue : 10 March 2017
Date of 2016/2017 issue : 8 November 2017
Date of 2017/2018 issue : 30 January 2019
Date of 2018/2019 issue : 7 August 2019
Date of 2019/2020 issue : 21 August 2020
Date of 2020/2021 issue : 10 November 2021
Tax Guide for Small Businesses (2020/2021) ii
, Contents
Preface ............................................................................................................................ i
Glossary ........................................................................................................................ 1
1. Overview ............................................................................................................ 2
2. General characteristics of different types of business ................................... 2
2.1 Introduction ................................................................................................................... 2
2.1.1 Sole proprietorship .............................................................................................................. 2
2.1.2 Partnership .......................................................................................................................... 3
2.1.3 Close corporation ................................................................................................................ 4
2.1.4 Private company ................................................................................................................. 4
2.1.5 Co-operative ........................................................................................................................ 5
2.1.6 Other types of business entities .......................................................................................... 5
(a) Small business corporation ................................................................................................. 5
(b) Micro business (turnover tax) .............................................................................................. 5
(c) Personal service provider.................................................................................................... 5
(d) Labour broker ...................................................................................................................... 6
(e) Independent contractor ....................................................................................................... 7
(f) Small, medium and micro enterprises ................................................................................. 8
3. A business and the South African Revenue Service ...................................... 8
3.1 Introduction ................................................................................................................... 8
3.2 Income tax ..................................................................................................................... 8
3.2.1 General................................................................................................................................ 8
3.2.2 Registration ......................................................................................................................... 8
3.2.3 Change of address .............................................................................................................. 8
3.2.4 Year of assessment and filing of income tax returns .......................................................... 9
3.2.5 SARS eFiling and SARS MobiApp ...................................................................................... 9
3.2.6 Payments at banks............................................................................................................ 11
3.2.7 Electronic funds transfer ................................................................................................... 11
3.2.8 Provisional tax (the Fourth Schedule) ............................................................................... 11
3.2.9 Employees’ tax (Pay-As-You-Earn) (the Fourth Schedule) .............................................. 11
3.2.10 How to determine net profit or loss of a business ............................................................. 12
3.2.11 Comparative profit or loss statements .............................................................................. 14
3.2.12 Connection between “net profit” and “taxable income” ..................................................... 14
3.2.13 Determination of taxable income or assessed loss .......................................................... 14
3.2.14 General deduction formula ................................................................................................ 15
3.2.15 Tax rates and rebates ....................................................................................................... 16
(a) Taxable income (excluding any retirement fund lump sum benefit, retirement fund lump
sum withdrawal benefit or severance benefit) of any natural person, deceased estate,
insolvent estate or special trust ......................................................................................... 16
(b) Taxable income of trusts (other than special trusts or public benefit organisations,
recreational clubs or small business funding entities that are trusts) ............................... 19
(c) Taxable income of companies .......................................................................................... 19
3.2.16 Special allowances or deductions and recoupment.......................................................... 20
(a) Machinery, plant, implements, utensils and articles [section 11(e)] ................................. 21
(b) Inventions, patents, designs, trade marks, copyrights and knowledge [sections 11(gA),
11(gB) and 11(gC)] ........................................................................................................... 21
(c) Expenditure incurred to obtain a licence [section 11(gD)] ................................................ 23
(d) Scientific or technological research and development (sections 11D, 12C and 13) ........ 23
(e) Machinery, plant, implements, utensils or articles or improvements thereto used in
farming or production of renewable energy (section 12B) ................................................ 24
(f) Aircraft and ships (section 12C) ........................................................................................ 25
(g) Manufacturing assets (section 12C) ................................................................................. 26
(h) Certain pipelines, transmission lines and railway lines (section 12D) .............................. 27
(i) Rolling stock (trains and carriages) (section 12DA) .......................................................... 28
(j) Airport assets (section 12F) .............................................................................................. 28
(k) Port assets (section 12F) .................................................................................................. 28
(l) Additional deduction for learnership agreements (section 12H) ....................................... 29
(m) Allowance for land conservation of nature reserves or national parks (section 37D) ....... 30
Tax Guide for Small Businesses 2020/2021 iii
Tax Guide for Small Businesses
, Tax Guide for Small Businesses
Preface
This guide is a general guide dealing with the taxation of small businesses such as sole
proprietors, partnerships and companies not part of large groups. Some of the discussions in
this guide could, however, be applicable to any type of taxpayer. The aim is to discuss the
typical taxation issues of an average business trading in South Africa.
This guide is not an “official publication” as defined in section 1 of the Tax Administration
Act 28 of 2011 and accordingly does not create a practice generally prevailing under section 5
of that Act. It should, therefore, not be used as a legal reference. It is also not a binding general
ruling under section 89 of Chapter 7 of the Tax Administration Act. Should an advance tax
ruling be required, visit the SARS website for details of the application process.
The information in this guide concerning income tax relates to –
• natural persons for the 2021 year of assessment commencing on 1 March 2020 and
ending on 28 February 2021;
• trusts in respect of years of assessment commencing and ending during the period
commencing on 1 March 2020 and ending on 28 February 2021; and
• companies and CCs with years of assessment ending during the 12-month period
ending on 31 March 2021.
While care has been taken in the preparation of this document to ensure that the information
and the rates published are correct at the date of publication, this document must be read with
the relevant legislation pertaining to that rate, applicable to the tax, customs or excise
concerned.
For income tax purposes, this guide has been updated to include the Tax Administration Laws
Amendment Act 24 of 2020, the Taxation Laws Amendment Act 23 of 2020 and the Rates and
Monetary Amounts and Amendment of Revenue Laws Act 22 of 2020 as well as the Budget
Review of 2020.
For indirect tax purposes, all information has been updated to include amendments up to the
date of the publication of this guide.
Should you require additional information concerning any aspect of taxation, you may –
• visit the SARS website at www.sars.gov.za;
• visit your nearest SARS branch, preferably after making an appointment via the SARS
website;
• have a virtual consultation with a SARS consultant by making an appointment via the
SARS website;
• contact the SARS National Contact Centre–
if calling locally, on 0800 00 7277; or
if calling from abroad, on +27 11 602 2093 (only between 8am and 4:30pm
South African time); or
• contact your own tax advisor or tax practitioner.
Tax Guide for Small Businesses (2020/2021) i
,All guides, interpretation notes, brochures, forms, returns, tables and Government Notices
referred to in this guide are available on the SARS website. Unless indicated otherwise, the
latest issue of these documents should be consulted.
Comments or suggestions on this guide may be emailed to .
Leveraged Legal Products
SOUTH AFRICAN REVENUE SERVICE
Date of 2009 issue : November 2008
Date of 2010 issue : December 2009
Date of 2010/2011 issue : February 2011
Date of 2012/2013 issue : November 2013
Date of 2013/2014 issue : 24 March 2014
Date of 2014/2015 issue : 27 March 2015
Date of 2015/2016 issue : 10 March 2017
Date of 2016/2017 issue : 8 November 2017
Date of 2017/2018 issue : 30 January 2019
Date of 2018/2019 issue : 7 August 2019
Date of 2019/2020 issue : 21 August 2020
Date of 2020/2021 issue : 10 November 2021
Tax Guide for Small Businesses (2020/2021) ii
, Contents
Preface ............................................................................................................................ i
Glossary ........................................................................................................................ 1
1. Overview ............................................................................................................ 2
2. General characteristics of different types of business ................................... 2
2.1 Introduction ................................................................................................................... 2
2.1.1 Sole proprietorship .............................................................................................................. 2
2.1.2 Partnership .......................................................................................................................... 3
2.1.3 Close corporation ................................................................................................................ 4
2.1.4 Private company ................................................................................................................. 4
2.1.5 Co-operative ........................................................................................................................ 5
2.1.6 Other types of business entities .......................................................................................... 5
(a) Small business corporation ................................................................................................. 5
(b) Micro business (turnover tax) .............................................................................................. 5
(c) Personal service provider.................................................................................................... 5
(d) Labour broker ...................................................................................................................... 6
(e) Independent contractor ....................................................................................................... 7
(f) Small, medium and micro enterprises ................................................................................. 8
3. A business and the South African Revenue Service ...................................... 8
3.1 Introduction ................................................................................................................... 8
3.2 Income tax ..................................................................................................................... 8
3.2.1 General................................................................................................................................ 8
3.2.2 Registration ......................................................................................................................... 8
3.2.3 Change of address .............................................................................................................. 8
3.2.4 Year of assessment and filing of income tax returns .......................................................... 9
3.2.5 SARS eFiling and SARS MobiApp ...................................................................................... 9
3.2.6 Payments at banks............................................................................................................ 11
3.2.7 Electronic funds transfer ................................................................................................... 11
3.2.8 Provisional tax (the Fourth Schedule) ............................................................................... 11
3.2.9 Employees’ tax (Pay-As-You-Earn) (the Fourth Schedule) .............................................. 11
3.2.10 How to determine net profit or loss of a business ............................................................. 12
3.2.11 Comparative profit or loss statements .............................................................................. 14
3.2.12 Connection between “net profit” and “taxable income” ..................................................... 14
3.2.13 Determination of taxable income or assessed loss .......................................................... 14
3.2.14 General deduction formula ................................................................................................ 15
3.2.15 Tax rates and rebates ....................................................................................................... 16
(a) Taxable income (excluding any retirement fund lump sum benefit, retirement fund lump
sum withdrawal benefit or severance benefit) of any natural person, deceased estate,
insolvent estate or special trust ......................................................................................... 16
(b) Taxable income of trusts (other than special trusts or public benefit organisations,
recreational clubs or small business funding entities that are trusts) ............................... 19
(c) Taxable income of companies .......................................................................................... 19
3.2.16 Special allowances or deductions and recoupment.......................................................... 20
(a) Machinery, plant, implements, utensils and articles [section 11(e)] ................................. 21
(b) Inventions, patents, designs, trade marks, copyrights and knowledge [sections 11(gA),
11(gB) and 11(gC)] ........................................................................................................... 21
(c) Expenditure incurred to obtain a licence [section 11(gD)] ................................................ 23
(d) Scientific or technological research and development (sections 11D, 12C and 13) ........ 23
(e) Machinery, plant, implements, utensils or articles or improvements thereto used in
farming or production of renewable energy (section 12B) ................................................ 24
(f) Aircraft and ships (section 12C) ........................................................................................ 25
(g) Manufacturing assets (section 12C) ................................................................................. 26
(h) Certain pipelines, transmission lines and railway lines (section 12D) .............................. 27
(i) Rolling stock (trains and carriages) (section 12DA) .......................................................... 28
(j) Airport assets (section 12F) .............................................................................................. 28
(k) Port assets (section 12F) .................................................................................................. 28
(l) Additional deduction for learnership agreements (section 12H) ....................................... 29
(m) Allowance for land conservation of nature reserves or national parks (section 37D) ....... 30
Tax Guide for Small Businesses 2020/2021 iii
