Does a company need to apply formally to SARS to become an SBC?

No. There is no separate pre-application or formal registration form required to become an SBC. Qualification is self-assessed annually when your tax practitioner completes the corporate tax return (ITR14). The return contains a dedicated Section 12E questionnaire. If your entity satisfies all statutory criteria, the eFiling system automatically calculates your liability using the reduced SBC tax brackets. However, you must maintain audited documentation to prove qualification if SARS issues a verification audit.

Can a Small Business Corporation also register for Value-Added Tax (VAT)?

Yes. SBC tax status and VAT registration operate under completely separate legislation. Being an SBC for income tax purposes under Section 12E does not exempt you from VAT obligations under the Value-Added Tax Act. If your enterprise turnover exceeds R1 million in any 12-month period, you must register for VAT and submit bi-monthly VAT201 returns. Refer to our practical VAT calculation guide for threshold rules.

Can a family trust own shares in a Small Business Corporation?

No. Section 12E strictly mandates that all shareholders must be natural persons. If a family trust, investment trust, or juristic entity owns even a fraction of a share in your company, the entity is automatically disqualified from claiming SBC tax rates and must pay the standard flat 27% corporate tax rate.

What happens to SBC tax rates if annual turnover exceeds R20 million?

If your gross turnover reaches R20,000,001 or more in a financial year, you lose SBC status immediately for that specific tax year. Your taxable profit is taxed at the flat 27% corporate rate, and you lose access to Section 12E accelerated depreciation. If your turnover dips back below R20 million in the following year and all other tests are met, your company can reclaim SBC status.

Small Business Corporation Tax: 2026 SBC Rates Guide