South African Corporate Income Tax
Corporate income tax in South Africa is governed by the Income Tax Act 58 of 1962, administered by SARS. The standard corporate tax rate is 27% (effective for companies with years of assessment ending on or after 31 March 2023; previously 28%).
Tax Rates
Standard Companies
27% on taxable income.
Small Business Corporations (SBC)
A more favourable sliding scale applies where the company meets ALL of the following:
- All shareholders are natural persons
- Annual taxable income does not exceed R20 million
- No shareholder holds a shareholding in another company (with limited exceptions)
- Not a personal service provider
- Not an investment company
2024/25 SBC Tax Table:
| Taxable Income | Rate |
|---|
| R0 – R95,750 | 0% |
| R95,751 – R365,000 | 7% on the amount above R95,750 |
| R365,001 – R550,000 | R18,848 + 21% on the amount above R365,000 |
| R550,001+ | R57,698 + 27% on the amount above R550,000 |
Personal Service Providers
Taxed at 27%. Cannot claim most employee-related deductions.
Dividends Tax
20% withheld on dividends paid to shareholders. Dividend Tax is a withholding tax — the company withholds and pays to SARS on behalf of the shareholder.
Exemptions:
- Dividends paid to SA resident companies (inter-company dividends)
- Dividends paid to certain public benefit organisations
- Foreign dividends are exempt if the SA company holds ≥10% in the foreign company (subject to conditions)
Provisional Tax
Provisional tax is a mechanism to pay income tax in advance during the tax year rather than as a lump sum. Companies are provisional taxpayers.
First Provisional Tax Return (IRP6 — First Period)
Due: Last day of the 6th month of the tax year
- Estimate: At least 80% of the actual tax liability for the year, or the basic amount (prior year's taxable income)
- Minimum payment: Based on the basic amount (SARS's estimate from prior year)
- Penalty for underpayment: 20% of the shortfall if less than 80% of actual liability
Second Provisional Tax Return (IRP6 — Second Period)
Due: Last day of the tax year
- Estimate: At least 80% of actual tax liability
- This is the critical estimate — if you pay too little here, penalties apply
Third (Optional) Provisional Tax Return
Due: 7 months after year-end (for February year-end: by 30 September)
- Allows topping up to avoid the 20% underestimation penalty
- Strongly recommended when actual tax liability will significantly exceed the second provisional estimate
Example (February Year-End Company)
| Event | Due Date |
|---|
| 1st Provisional | 31 August |
| 2nd Provisional | 28/29 February |
| Optional 3rd | 30 September |
| Tax Return (ITR14) | 12 months after year-end |
Taxable Income Calculation
Gross Income
Less: Exempt Income
= Income
Less: Deductions (s11)
Add: Recoupments and capital gains (CGT inclusion)
= Taxable Income
× Tax Rate
= Normal Tax
Less: Rebates (not applicable to companies)
Less: Provisional Tax Paid
= Tax Payable / (Refundable)
Key Allowable Deductions (Section 11)
- Expenses actually incurred in the production of income
- Not of a capital nature
- Not prohibited by another section
Common deductions:
- Salaries and wages (including employer UIF and SDL)
- Rent
- Repairs and maintenance (not improvements)
- Bad debts (written off, previously included in income)
- Professional fees (accounting, legal)
- Marketing and advertising
- Travel (at SARS rate or actual cost with logbook)
- Medical aid employer contributions (for employees)
- Interest on borrowings used for trade purposes
Capital vs Revenue Distinction
Capital expenditure is not immediately deductible. Instead:
- Section 11(e) — wear and tear allowance on plant, machinery, and equipment
- Section 12C — manufacturing plant: 40/20/20/20 or 20% per year
- Section 13 — buildings: 5% per year for commercial, 10% for residential rental
- Section 12B — renewable energy assets: 100% in year 1 (solar, wind)
Assessed Losses
A company that incurs a loss in a tax year may carry the assessed loss forward indefinitely, subject to the balance of assessed loss limitation:
- From 1 April 2022: A company may only set off a balance of assessed loss against 80% of taxable income in a given year
- The remaining 20% of taxable income is always taxable, even where assessed losses exist
- Example: Taxable income R1m, assessed loss R2m → Tax on R200,000 (20% of R1m is always taxable)
Transfer Pricing
Applicable to transactions between connected persons (related parties):
- Must be at arm's length (as if between unrelated parties)
- Documentation required to support pricing decisions
- SARS may adjust pricing to arm's length equivalent
- Applies to cross-border and (under s31) certain domestic related-party transactions
Common Tax Planning Considerations (Legitimate)
- Timing of income recognition: Defer income to the next tax year where possible (subject to anti-avoidance rules)
- Accelerated depreciation: Use Section 12B for renewable energy assets (100% year 1)
- Research & Development: Section 11D allows a 150% deduction for qualifying R&D expenditure
- Learnership allowances: Section 12H — additional deductions for registered learnerships (NQF Level 1-6)
- Small Business Corporation: Structure to qualify if shareholders are natural persons
- Dividend vs Salary: At 27% CIT + 20% dividends tax (effective 41.6%) vs marginal income tax rates — analysis required per situation
Annual Tax Return (ITR14)
Due 12 months after the company's year-end. Filed on SARS eFiling.
Requires:
- Financial statements (IFRS for SMEs or full IFRS)
- Reconciliation of accounting profit to taxable income
- Supporting schedules for capital allowances, assessed losses, related party transactions