The standard corporate income tax rate in South Africa is 27% for years of assessment ending 1 April 2026 to 31 March 2027. Budget 2026 announced no change. However, a qualifying Small Business Corporation pays a sliding scale starting at 0% on the first R99,000 of taxable income, and a qualifying micro-business can elect Turnover Tax instead — where the first R600,000 of turnover is taxed at 0%.
Most South African companies pay 27% because nobody checked whether they qualified for something better. The saving from getting this right runs to tens of thousands of rands a year for a profitable small company.
TL;DR
| Regime | Applies to | Rate |
|---|---|---|
| Standard CIT | All companies not qualifying for anything else | 27% flat |
| Small Business Corporation | Qualifying companies (see tests below) | 0% / 7% / 21% / 27% sliding scale |
| Turnover Tax | Qualifying micro-businesses under R2.3m turnover | 0% / 1% / 2% / 3% of turnover |
Companies in approved Special Economic Zones may qualify for 15%, subject to requirements.
Dividends tax of 20% applies on top when profits are distributed.
The CIT rate was reduced from 28% to 27% in 2022/23 and has been unchanged since.
The standard rate: 27%
For years of assessment ending 1 April 2026 to 31 March 2027, the standard corporate income tax rate is 27% of taxable income.
This is a flat rate. Unlike individuals, a company has no rebates, no thresholds and no progressive brackets. A company with R50,000 of taxable income pays 27% of it; a company with R50 million pays 27% of that.
What 27% is charged on
Taxable income — gross income, less exempt income, less allowable deductions. That is not the same as profit in your financial statements. The common differences:
Depreciation in the accounts is replaced by wear and tear allowances for tax
Entertainment, fines and penalties are added back
Provisions are generally not deductible until incurred
Capital gains are included at the inclusion rate, giving a maximum effective CGT rate of 21.6% for companies
Assessed losses brought forward can only offset 80% of taxable income, or R1 million if higher
The second layer: dividends tax
27% is not the end of it. Getting the after-tax profit into your own hands attracts dividends tax at 20%.
| Amount | |
|---|---|
| Company taxable income | R1,000,000 |
| Company tax at 27% | (R270,000) |
| After-tax profit | R730,000 |
| Dividends tax at 20% | (R146,000) |
| In your hand | R584,000 |
| Combined effective rate | 41.6% |
That combined 41.6% is the number to compare against your personal marginal rate when deciding how to extract profit. See salary or dividends: how should a Pty Ltd owner pay themselves.
Small Business Corporation rates
If your company qualifies as an SBC, the difference is substantial.
2026/27 SBC rates
For years of assessment ending 1 April 2026 to 31 March 2027:
| Taxable income | Rate of tax |
|---|---|
| R0 – R99,000 | 0% |
| 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 |
What that saves
| Taxable income | Tax at 27% | Tax as an SBC | Saving |
|---|---|---|---|
| R100,000 | R27,000 | R70 | R26,930 |
| R300,000 | R81,000 | R14,070 | R66,930 |
| R500,000 | R135,000 | R46,970 | R88,030 |
| R750,000 | R202,500 | R111,470 | R91,030 |
| R1,500,000 | R405,000 | R313,970 | R91,030 |
The saving builds to roughly R91,030 and then plateaus, because everything above R550,000 is taxed at the same 27% either way. But R91,030 a year, every year, is a serious amount for a small company — and a great many companies that qualify have never claimed it.
The qualifying tests
To be a Small Business Corporation under section 12E:
All shareholders or members must be natural persons throughout the year. A single corporate shareholder disqualifies the company.
No shareholder may hold shares in another company, subject to limited exceptions such as listed shares and certain dormant entities. This is the test that catches most people.
Gross income must not exceed the prescribed threshold. SARS's Budget 2026 FAQ states gross income of not more than R20 million.
Not more than 20% of receipts may come from investment income and income from rendering a personal service.
The company must not be a personal service provider.
Worth confirming before you rely on it: SARS's Budget 2026 FAQ states the SBC gross income limit as R20 million. Some Budget 2026 commentary reported an increase of the qualifying threshold to R25 million. If your gross income sits between those two figures, confirm the enacted position with SARS or your tax practitioner before claiming SBC rates — do not rely on either number from a blog, including this one.
Test 2 is the one that quietly disqualifies otherwise-eligible companies. If you own shares in a second company — even a dormant one you set up years ago and forgot — your operating company may lose SBC status entirely. It is worth checking your CIPC records.
The additional benefit: section 12E asset write-offs
SBC status also unlocks accelerated capital allowances. Qualifying manufacturing assets can be written off 100% in the year of acquisition, and other qualifying assets over three years on a 50/30/20 basis, instead of the ordinary wear and tear rates.
For a small manufacturer buying R400,000 of plant, that alone is worth roughly R108,000 of tax deferred into the current year.
Turnover Tax for micro-businesses
A third option, and one that got considerably more attractive on 1 April 2026.
Turnover Tax is a simplified regime that replaces income tax, VAT, provisional tax, capital gains tax and dividends tax with a single tax calculated on turnover rather than profit.
2026/27 Turnover Tax rates
| Taxable turnover | Rate |
|---|---|
| R0 – R600,000 | 0% |
| R600,001 – R950,000 | 1% of the amount above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% of the amount above R950,000 |
| R1,400,001 and above | R12,500 + 3% of the amount above R1,400,000 |
The annual turnover limit for the regime rose to R2.3 million from R1 million, and the 0% band rose from R335,000 to R600,000 — the first update since 2009. The restriction on tax year-end dates was also removed.
The critical difference: turnover, not profit
Turnover Tax is charged on sales, regardless of whether you made a profit. That makes it excellent for high-margin businesses and potentially terrible for low-margin ones.
A consultant turning over R700,000 with R150,000 of costs — R550,000 profit:
Turnover Tax: 1% × R100,000 = R1,000
SBC: R18,620 + 21% × R185,000 = R57,470
Turnover Tax wins by R56,470
A retailer turning over R2,000,000 with R1,850,000 of costs — R150,000 profit:
Turnover Tax: R12,500 + 3% × R600,000 = R30,500
SBC: 7% × R51,000 = R3,570
SBC wins by R26,930
The rule of thumb: the higher your margin, the better Turnover Tax looks.
Who does not qualify
Businesses with turnover above R2.3 million
Where more than 20% of total receipts come from rendering professional services — accounting, auditing, actuarial, consulting, management services and similar
Personal service providers and labour brokers
Businesses where more than 20% of receipts come from investment income, rental, dividends and similar
Companies with ineligible ownership structures — any shareholder who is not a natural person, or where the business holds shares in an unlisted company
Businesses that previously opted out and were deregistered from the regime
The professional services exclusion is broad and rules out a large share of the service businesses that would otherwise benefit most.
How to register and pay
Register via the SARS Online Query System. Registration is optional.
New businesses: apply within two months of starting to trade.
Existing businesses: register or switch before the start of a new tax year.
Payments are made in two instalments using a TT02 — the first six months after your tax year begins, the second at year end — with a final TT03 return after year end.
You can be on Turnover Tax and registered for VAT at the same time. They are separate systems.
When the tax is actually payable
The rate is only half the question. Companies pay income tax in advance, through provisional tax, and the timing catches new business owners badly.
First provisional payment (IRP6): due six months into your financial year. For a February year-end, that is 31 August.
Second provisional payment: due on the last day of your financial year — 28 February for a February year-end. This one must be based on actual estimated taxable income, and getting it materially wrong triggers penalties.
Voluntary third or top-up payment: made within six months of year-end, to stop section 89quat interest accruing.
ITR14 annual return: due 12 months after your financial year end. If you are also VAT registered, note that VAT returns run on an entirely separate cycle.
The 80% underestimation penalty
If your second provisional estimate comes in below 80% of your final taxable income, a 20% penalty applies to the shortfall. For a company that has a strong final quarter and does not revise its estimate, that penalty arrives as an unwelcome surprise on assessment.
Interest on late or underpaid tax
10.25% per annum from 2 March 2026. Refunds of overpaid provisional tax attract interest at 6.25%, so overpaying is not free either.
Special Economic Zones: the 15% rate
Companies carrying on business in an approved Special Economic Zone may qualify for a reduced corporate tax rate of 15%, subject to the applicable requirements.
Budget 2026 proposed reforming the anti-avoidance rules governing SEZ qualification, to allow more legitimate supply chain integration — a change aimed at businesses that were being excluded on technical grounds despite genuine operations in a zone.
The regime is narrow and the requirements are specific. It is worth investigating if you are making a location decision for manufacturing or logistics operations, and not worth investigating otherwise.
Other numbers that affect what a company actually pays
| Item | 2026/27 |
|---|---|
| Corporate income tax | 27% |
| Effective CGT rate for companies | 21.6% |
| Dividends tax | 20% |
| Interest on late or underpaid tax | 10.25% p.a. |
| Interest on refunds of overpaid provisional tax | 6.25% p.a. |
| Official rate on low-interest loans (from 1 Dec 2025) | 7.75% p.a. |
| Donations tax annual exemption — non-natural persons | R20,000 (up from R10,000) |
| Lifetime small-business asset disposal exclusion | R15,000,000 (up from R10,000,000) |
| Small-business disposal exclusion, age 55+ | R2,700,000 (up from R1,800,000) |
Those last two are worth flagging for anyone contemplating a sale. The lifetime small-business asset disposal exclusion rose from R10 million to R15 million, and the exclusion for business owners aged 55 and over rose from R1.8 million to R2.7 million — with the market-value ceiling for qualifying small businesses lifted from R10 million to R15 million. For an owner approaching an exit, that is a material change.
Which regime should you be on?
| Your situation | Likely best |
|---|---|
| Turnover under R2.3m, high margin, not professional services | Turnover Tax |
| Turnover under R2.3m, low margin | SBC |
| Profitable, natural-person shareholders, no other shareholdings | SBC |
| Any corporate shareholder, or a shareholder holding other shares | Standard 27% |
| Professional services company | SBC if it qualifies, otherwise standard |
| Approved Special Economic Zone operations | 15%, subject to requirements |
Two things to check this year, whatever your position:
1. Do your shareholders hold shares in other companies? This single fact disqualifies SBC status and is the most common reason a qualifying company pays 27%. Check CIPC records for every shareholder.
2. If you were excluded from SBC previously on gross income, recheck. The threshold position for 2026/27 should be confirmed — a company that lost SBC status on turnover may qualify again.
Frequently asked questions
What is the company tax rate in South Africa in 2026? 27% for years of assessment ending 1 April 2026 to 31 March 2027. Budget 2026 announced no change. Companies in approved Special Economic Zones may qualify for a reduced rate of 15%, subject to the applicable requirements.
How much tax does a small company pay in South Africa? A qualifying Small Business Corporation pays 0% on the first R99,000 of taxable income, 7% from R99,001 to R365,000, R18,620 plus 21% from R365,001 to R550,000, and R57,470 plus 27% above R550,000. A company that does not qualify pays a flat 27%.
What is the difference between company tax and dividends tax? Company tax is charged on the company's taxable income at 27%. Dividends tax of 20% is charged separately when after-tax profits are distributed to shareholders. The combined effective rate on distributed profits is approximately 41.6%.
Do I qualify as a Small Business Corporation? All shareholders must be natural persons, none of them may hold shares in another company subject to limited exceptions, gross income must be under the prescribed threshold, not more than 20% of receipts may come from investment income or personal services, and the company must not be a personal service provider.
Is Turnover Tax better than company tax? It depends on your margin. Turnover Tax is charged on sales rather than profit, so high-margin businesses generally do far better on it, while low-margin businesses can pay considerably more. It is only available to qualifying micro-businesses with turnover up to R2.3 million and excludes professional services businesses earning more than 20% of receipts from those services.
Can a company be registered for both Turnover Tax and VAT? Yes. They are separate systems, and being on Turnover Tax does not prevent VAT registration, voluntarily or because you exceed the compulsory threshold.
What is the capital gains tax rate for companies? Capital gains are included in taxable income at the inclusion rate, giving a maximum effective CGT rate of 21.6% for companies, against 18% for individuals and special trusts and 36% for other trusts.
How does the assessed loss restriction work? Assessed losses brought forward can only offset 80% of taxable income, or R1 million if that is higher. The balance carries forward. It means a company with brought-forward losses can still have tax to pay in a profitable year.
Check which regime you should be on
Three regimes, and the difference between the best and worst outcome for a profitable small company runs to R90,000 a year or more. The single most common reason a company overpays is a shareholder holding shares in another company that nobody remembered.
Smartbook checks SBC and Turnover Tax eligibility as part of preparing annual financial statements and the ITR14, models the alternatives on your actual numbers, and flags the shareholding issues that quietly disqualify you.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Figures are for years of assessment ending 1 April 2026 to 31 March 2027. Note the flagged uncertainty on the SBC gross income threshold. General guidance, not advice on your circumstances.
Primary sources: SARS — Budget 2026 Frequently Asked Questions · SARS — Small Businesses Taxpayers · SARS — Tax Rates · SARS Online Query System — Turnover Tax