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Small Business Corporations (SBC) - Coggle Diagram
Small Business Corporations (SBC)
Qualification Criteria (Must Meet ALL Requirements)
Shareholder Rule
All shareholders or members must be natural persons throughout the entire year of assessment
Gross Income Limit
Gross income must not exceed R20 million for the year of assessment
Shareholding Restrictions
Owners cannot hold interests or shares in any other companies (except for specific permitted investments)
The 20% Income Test
Combined Investment Income + Personal-Service Income <= 20% of (Revenue Receipts/Accruals + Capital Gains)
PSP Exclusion
A personal service provider (PSP) cannot qualify as an SBC under any circumstances
The 20% Test Breakdowns
Investment Income Includes
Interest
Dividends
Royalties
Rental income
Annuities
Gains from certain financial instruments
Personal Services Include (Professional Fields)
Accounting & Auditing
Consulting & Management
Legal services
Engineering & Architecture
IT (Information Technology)
Medical services
Valuation
Section 12E Benefits & Allowances
Accelerated Capital Allowances
Manufacturing Equipment
100% deduction in the exact tax year the asset is first brought into use
Other Qualifying Assets (Non-Manufacturing)
Option 1: Normal Section 11(e) wear-and-tear allowances
Option 2: Section 12E accelerated allowance split -> 50% (Year 1) / 30% (Year 2) / 20% (Year 3)
The R7,000 Small-Item Exception
If non-manufacturing asset costs < R7,000, Section 11(e) permits an immediate 100% write-off (better than 50:30:20)
No Apportionment Rule
Section 12E allowances are never apportioned for part-year use, even if the asset is acquired mid-year
SBC Progressive Tax Rates
SBCs are taxed on a progressive multi-tiered tax scale rather than the flat standard corporate income tax rate