How do you define a Small Business Corporation in South Africa for taxation purposes?
a Small Business Corporation can be described as a close orporation, co-operative or a private company, which adheres to all the following requirements for taxation purposes:
* All the shareholder/members must at all times during the year of assessment be natural persons (individuals);
* Shareholders/Members may not hold any shares/members interest in equity of any other company/close corporation. However a share or interest in the following entities are excluded from this requirement:
1. Listed Companies;
2. A participatory interest in a collective investment scheme;
3. A company contemplated in section 10(1)(e) of the Act (body corporate);
4. Less than 5% of the interest in non-business co-operatives such as consumer buy-aids, social co-operatives (such as child nursery facilities) or burial societies;
5. Friendly societies; and
6. Less than 5% of the interest in a primary savings co-operative bank or a primary savings and loans co-operative bank as defined in the Co-operatives Bank Act, 2007.
* The gross income for the year may not exceed R14 million;
* Not more than 20% of the total of all receipts and accruals (other than those of a capital nature) and all the capital gains may consist collectively of investment income and income from rendering a personal services.
Investment income includes interest, dividends, royalties, rental in respect of immovable property, annuities or income of a similar nature, interest contemplated in section 24J of the Act, other than
interest earned by a co-operative bank, amounts contemplated in section 24K of the Act and proceeds derived from investment/trading in financial instruments/marketable securities/immovable property.
Personal services are services in the field of, for example accounting, real estate, consulting, attorneys, auditors, engineers, sport, journalism and secretarial services which are performed personally by a person holding an interest in the Small Business Corporation.
A Small Business Corporation which is engaged in the provision of personal services will still qualify for the tax relief if it throughout the year of assessment employs three or more full-time employees who
are on a full-time basis engaged in the business of the Small Business Corporation rendering that service. This business may not be an empoyment company. Read more on taxation of Small Businesses in South Africa. AFS Financial Services will supply you with the right advice.
