SBC Tax vs Turnover Tax: Which Is Better for Your Small Business?
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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. For 2026/2027, rates range from 0% (up to R600K, raised from R335K before 1 April 2026) to 3% (above R1.4M). The qualification ceiling also rose from R1M to R2.3M. Best for businesses with low expenses where most revenue is profit. It is not open to everyone: if more than 20% of your receipts come from professional services (consulting, accounting, law, IT, education and similar), you are excluded. SARS says it replaces income tax, provisional tax, CGT and dividends tax — simpler administration. Staff taxes such as PAYE and UIF still apply.
Side-by-Side Comparison
At R700K turnover with R280K expenses: SBC tax on R420K profit = ~R30,170. Turnover tax on R700K = R1,000. Turnover tax wins by R29,170. But at R700K turnover with R630K expenses: SBC tax on R70K profit = R0. Turnover tax still R1,000. SBC wins when profit margins are thin.