SBC Tax vs Turnover Tax: Which Is Better for Your Small Business?
Last reviewed:
South Africa offers two simplified tax regimes for small businesses: Small Business Corporation (SBC) tax and Turnover Tax. Choosing the right one can save your business tens of thousands of rands per year.
SBC Tax: For Profitable Businesses
SBC tax uses progressive rates on taxable income (after expenses). The first R95,750 (2025/2026) or R99,000 (2026/2027) is tax-free, then rates climb from 7% to 27%. Best for businesses with high expenses relative to turnover (high cost of goods, salaries, rent) because you deduct all allowable expenses before calculating tax.
Turnover Tax: For Simple, Low-Expense Businesses
Turnover tax applies to gross turnover — no deductions for expenses. Rates range from 0% (under R335K) to 3% (R750K–R1M). Best for businesses with low expenses (consultants, freelancers) where most revenue is profit. It also replaces provisional tax, CGT, and dividends tax — simpler administration.
Side-by-Side Comparison
At R500K turnover with R200K expenses: SBC tax on R300K profit = ~R14,298. Turnover tax on R500K = R1,650. Turnover tax wins by R12,648. But at R500K turnover with R450K expenses: SBC tax on R50K = R0. Turnover tax still R1,650. SBC wins when profit margins are thin.