Tax for Businesses

Companies pay tax on their profits at a flat rate of 27% (reduced from 28% for years of assessment ending on or after 31 March 2023). This applies to the net taxable income — revenue minus allowable business expenses.

Companies must file a provisional tax return twice a year (at 6 months and year-end) and a final ITR14 annual return. SARS expects the provisional estimates to be reasonably accurate — underestimation penalties apply if you are more than 20% off.

Qualifying small businesses (turnover under R20 million, among other requirements) benefit from graduated tax rates instead of the flat 27%:

If your business turnover exceeds R1 million in a 12-month period, you must register for VAT. Voluntary registration is available from R50,000. The standard rate is 15%.

VAT-registered businesses charge VAT on sales (output tax), claim VAT on business purchases (input tax), and pay the difference to SARS. Returns are filed every two months (Category B) or monthly (Category A, for larger businesses).

Certain items are zero-rated (basic foodstuffs like bread, milk, eggs, maize meal) or exempt (financial services, residential rent, public transport).

As an employer, you are responsible for:

• Registering for PAYE with SARS when you first hire employees
• Calculating and deducting the correct amount of PAYE from each employee's salary every month
• Deducting UIF — 1% from the employee and contributing a matching 1% as the employer
• Paying SDL — 1% of total payroll if your annual payroll exceeds R500,000
• Filing EMP201 — the monthly employer declaration, due by the 7th of the following month
• Filing EMP501 — the bi-annual employer reconciliation (August and February)
• Issuing IRP5 certificates — every employee must receive an IRP5 by the end of the tax year

Companies (and individuals with non-salary income) must pay provisional tax — advance payments towards their annual tax liability. There are two compulsory payments:

• First period (IRP6) — due 6 months into the tax year (estimate at least 50% of full-year liability)
• Second period — due at year-end (top up to cover the full estimated liability)
• Third period (optional) — within 6 months after year-end, to avoid interest on any shortfall

Underestimating provisional tax by more than 20% triggers penalties, so it pays to be realistic with your projections.

Every employer must issue IRP5 certificates to all employees and submit them to SARS during the bi-annual EMP501 reconciliation. The IRP5 must accurately reflect all remuneration paid, deductions made, and employer contributions (medical aid, retirement fund, etc.).

Getting IRP5s wrong creates problems for both you and your employees — incorrect certificates lead to incorrect assessments, disputes, and potential penalties for the employer.