Tax for a qualifying SBC on the reduced progressive scale versus the flat 27% rate.
SBC tax
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Tax at flat 27%
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Saving with SBC
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When a smaller company pays less
Most South African companies pay tax at a single flat rate on every rand of taxable income. This calculator uses 27 percent for that rate. A small business corporation, or SBC, is a special category that escapes the flat rate and instead climbs a gentle progressive scale: the first slice of profit is taxed at nothing, the next slice lightly, and only the upper reaches reach a rate close to the ordinary company rate. For a profitable small company the saving in the early bands can run to tens of thousands of rand a year, which is real money for an owner-managed business reinvesting every cent.
The mechanism mirrors how individuals are taxed, with brackets rather than one rate, and that is deliberate. SARS designed the SBC regime to give genuinely small, owner-run companies breathing room in their early years. The catch is that qualifying is strict, and many companies that feel small on paper do not actually meet the rules.
The bands that do the work
The scale this calculator applies for the 2025/26 year has four bands. Taxable income up to R95,750 is taxed at zero. From R95,750 to R365,000 the rate is 7 percent. From R365,000 to R550,000 it is 21 percent. Above R550,000 the top rate of 27 percent applies, which is where the SBC scale finally meets the ordinary company rate. The benefit is front-loaded, so it matters most to companies earning under about half a million rand of taxable profit. Treat each of these thresholds as the calculator's assumption and confirm the current figures with SARS, because the zero-rate band in particular tends to be nudged from year to year.
R450,000 of profit, two ways
Suppose a qualifying SBC has R450,000 of taxable income. On the SBC scale the first R95,750 is free, the slice from R95,750 to R365,000 attracts 7 percent (R18,848), and the slice from R365,000 to R450,000 attracts 21 percent (R17,850). That totals R36,698. A non-qualifying company would pay a flat 27 percent on the whole R450,000, or R121,500. The SBC saves R84,803.
| Band | Rate | Tax |
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Placing the two bills side by side shows the gap clearly. The SBC pays barely a third of what the flat-rate company would.
Watching the qualifying rules
The reduced scale is only worth modelling if the company actually qualifies, and that is where owners trip up. The shares must be held by natural persons throughout the year, gross income must stay under R20 million, no more than 20 percent of receipts may come from investment income and personal-service work combined, and the company cannot be a personal-service provider. Hold shares in another company and you usually fall out immediately. A frequent error is for a consultant to assume their one-person company qualifies, when the personal-service rules push it onto the flat rate instead.
A useful judgement call: once taxable income climbs well past R550,000, the SBC advantage on the marginal rand disappears, because both regimes tax the top slice at 27 percent. The saving you keep is the fixed benefit banked in the lower bands, not a percentage of every rand. So the regime is most valuable while profits are modest, and the relative gain shrinks as the company grows. If you are weighing an SBC against the micro-business turnover tax, that comparison turns on turnover and expenses rather than profit alone, and a separate tool is the better place to run it.
Does an SBC still pay dividends tax on top?
Yes. The SBC rate applies to company profit. When the company later distributes after-tax profit to shareholders as a dividend, a separate dividends tax, which this site models at 20 percent, is withheld on the payout. The reduced corporate scale lowers the first layer of tax but does not remove the second layer on distributions.
What happens the year my company stops qualifying?
It reverts to the flat company rate for that whole year of assessment. There is no proportioning. If your gross income tips over R20 million, or a company becomes a shareholder partway through, the reduced scale is lost for the year and you compute tax at the flat rate on all the taxable income.