A small business corporation (SBC) is a South African company that qualifies for lower income tax rates and faster asset write-offs. For financial years ending between 1 April 2026 and 31 March 2027, an SBC pays 0% on its first R99,000 of taxable income, then 7%, 21% and finally the normal company rate of 27%. To qualify, the company must have gross income of R20 million or less and be owned only by individuals, among other conditions.
SBC tax table 2026/27
For years of assessment ending between 1 April 2026 and 31 March 2027:
| Taxable income | Tax payable |
|---|---|
| R1 – 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 |
A company that doesn't qualify as an SBC pays a flat 27% on all its taxable income.
How much an SBC saves: an example
A company has taxable income of R400,000 for the year.
As an SBC:
R18,620 + 21% × (R400,000 − R365,000)
= R18,620 + R7,350
= R25,970
As an ordinary company:
27% × R400,000 = R108,000
The SBC saves R82,030 in tax on the same profit. The saving grows as profit rises to R550,000 (where it's R148,500 − R57,470 = R91,030) and stays at R91,030 for every rand above that.
Who qualifies as an SBC
Section 12E of the Income Tax Act sets the rules. All of these must be true for the whole year of assessment:
The entity is a private company, personal liability company, close corporation or co-operative.
The beneficial owners of all shares or members' interests are natural persons throughout the year. Another company cannot beneficially hold shares. Shares held through a trust can qualify where natural-person beneficiaries have vested rights throughout the year.
Gross income is R20 million or less for the year. The limit is reduced proportionately if the entity trades for less than 12 months.
No shareholder holds shares in another company, with limited exceptions, such as listed shares, collective investment schemes and certain dormant companies.
Investment income and income from "personal services" together make up no more than 20% of the company's total receipts and accruals, excluding capital receipts but including capital gains. Investment income includes interest, dividends, rental income and royalties.
It isn't a personal service provider under the Fourth Schedule. This test is separate from the section 12E personal-services income test above.
Professional practices such as consultants, accountants, doctors and engineers need to look closely at the personal services rule. Under section 12E, listed services performed by a shareholder or connected person count as personal services unless the entity employs three or more full-time, unconnected, non-shareholder employees in the business of rendering that service throughout the year. Fewer than three employees does not automatically disqualify a company; the 20% income limit must also be assessed.
Faster write-offs for assets
SBCs also get accelerated wear-and-tear allowances:
Manufacturing assets: 100% of the cost in the year the asset is first used.
Other assets: 50% in year one, 30% in year two and 20% in year three.
Ordinary companies usually write assets off over much longer periods, so this helps cash flow when you invest in equipment.
SBC vs turnover tax
Micro businesses with turnover of R2.3 million or less can choose turnover tax instead. It's a simple tax on turnover, not profit: 0% on the first R600,000 of turnover, rising to 1%, 2% and 3% on higher bands. It suits businesses with high margins and simple admin. SBC rules suit companies whose profits are a smaller share of turnover, or who are above the turnover tax limit.
Things that commonly disqualify a company
Another company beneficially holding shares, or a trust holding them without qualifying vested rights for natural-person beneficiaries
A shareholder who owns shares in another private company, even an unrelated or dormant one that doesn't meet the exception
Too much interest, rental or consulting-type income
A company that is a personal service provider under the Fourth Schedule
If one condition fails at any point in the year, the company is taxed at 27% for the whole year.
Is a company better than a sole proprietorship?
The SBC rates are one of the main reasons small business owners trade through a Pty Ltd. Compare both options in sole proprietor vs Pty Ltd.
Frequently asked questions
What is the SBC tax rate for 2026/27? 0% on the first R99,000 of taxable income, 7% up to R365,000, 21% up to R550,000 and 27% above R550,000, for years ending between 1 April 2026 and 31 March 2027.
What is the turnover limit for an SBC? Gross income must not exceed R20 million for the year of assessment.
Can a company owned by a trust be an SBC? It can qualify if natural-person beneficiaries have vested rights in all the shares throughout the year and every other SBC condition is met. A trust that beneficially owns the shares itself does not qualify.
Can a consulting company qualify as an SBC? Yes, if it meets every SBC condition, including not being a personal service provider under the Fourth Schedule. For section 12E, three full-time, unconnected, non-shareholder employees can exclude the listed services from personal-service income. With fewer employees, assess whether qualifying personal-service and investment income exceed the 20% limit.
Do I have to apply to SARS to be an SBC? No. There's no separate application. The company claims SBC rates on its ITR14 if it meets every requirement, and must be able to prove it if SARS asks.