If your business is small, SARS gives you two simplified routes: turnover tax and Small Business Corporation (SBC) tax. They work very differently. One taxes your sales, the other taxes your profit at reduced rates. The Budget 2026 changes, effective 1 April 2026, moved the goalposts for both, so even businesses that chose years ago should look again.
TL;DR
- Turnover tax suits micro businesses with turnover of R2.3 million or less: one tax replaces income tax, VAT, provisional tax, CGT and dividends tax.
- SBC tax suits profitable small companies: normal tax rules apply, but profit is taxed at reduced progressive rates (0% on the first R99,000 in 2026/27).
- Turnover tax is calculated on sales. SBC tax is calculated on profit after expenses.
- Your structure, record-keeping and growth plans decide. An accountant can run both calculations on your actual figures.
What is turnover tax?
Turnover tax is a simplified system for micro businesses. Instead of income tax, VAT, provisional tax, capital gains tax and dividends tax, you pay a single tax worked out on your turnover. SARS aimed it at businesses with simple records that want less paperwork.
You qualify if your turnover is R2.3 million or less for the year. That ceiling rose from R1 million in Budget 2026, effective 1 April 2026, so many more businesses now fit. Sole proprietors, partnerships, close corporations, companies and co-operatives can all apply. Personal-service providers and labour brokers are excluded, and a partner in more than one partnership does not qualify.
Registration happens before the year of assessment starts (1 March), or within two months of starting a business, on the SARS Online Query System or with a TT01 form at a branch. Returns (TT03) run from 1 July to 31 January, with payments due on the last business day of August, the last business day of February, and a final payment after assessment.
The 2026/27 rates, the first update since 2009:
| Taxable turnover | Rate |
|---|---|
| R0 – R600,000 | 0% |
| R600,001 – R950,000 | 1% of the amount above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% of the amount above R950,000 |
| R1,400,001 – R2,300,000 | R12,500 + 3% of the amount above R1,400,000 |
At the ceiling of R2.3 million, the maximum turnover tax for the year is R39,500. You must still keep records of all amounts received, dividends declared, and assets or liabilities over R10,000.
What is Small Business Corporation tax?
SBC tax keeps the normal tax system but taxes company profit at reduced progressive rates. It suits small companies that keep full accounting records and claim business expenses.
For years of assessment ending between 1 April 2026 and 31 March 2027:
| Taxable income | Rate |
|---|---|
| R1 – R99,000 | 0% |
| R99,001 – R365,000 | 7% of the amount above R99,000 |
| R365,001 – R550,000 | R18,620 + 21% of the amount above R365,000 |
| R550,001 and above | R57,470 + 27% of the amount above R550,000 |
For example, at R400,000 taxable income the SBC tax is R25,970, against R108,000 at the standard 27% company rate. The gap is why qualifying matters.
Qualifying is strict, and every requirement must hold for the full year. All shareholders or members must be natural persons. Gross income must stay under R20 million. The business may not be a personal-service or holding company. Owning shares in another private company, even briefly, disqualifies you for that year. Registration as an SBC happens with SARS, and the reduced rates are claimed on the company income tax return.
Which one fits? Compare them side by side
| Turnover tax | SBC tax | |
|---|---|---|
| Taxed on | Sales (turnover) | Profit (after expenses) |
| Expense deductions | None allowed | Full business deductions |
| Record-keeping | Minimal: income records plus an asset/liability list | Full accounting records |
| Returns | One annual TT03 return | Company return plus provisional tax |
| Suits | Very small businesses with thin margins and simple books | Profitable companies with real expenses to claim |
A practical rule: if your expenses are low relative to sales, turnover tax is often cheaper and far simpler. If you spend heavily to earn (stock, staff, equipment, rent), deducting those expenses under SBC usually wins. The crossover sits somewhere different for every business, which is why running both calculations on your own figures beats guessing.
How do the 2026 VAT changes affect the choice?
Budget 2026 also lifted the compulsory VAT registration threshold from R1 million to R2.3 million, effective 1 April 2026. If your turnover sits between the old and new thresholds, you may no longer need a VAT registration at all, and SARS notes such businesses can consider turnover tax for lower rates and less administration. Businesses already in the VAT system may stay there if they prefer, including turnover-tax registrants. Voluntary VAT registration now starts at R120,000 turnover, up from R50,000.
Talk to your accountant before you elect
Both regimes reward a bit of arithmetic up front and punish assumptions later. Electing turnover tax when your margins are fat, or missing SBC status over a technicality like a second shareholding, costs real money. Bring a year of figures to your accountant and ask for both calculations in rands before you commit. At Schoemans Accountants we run exactly that comparison for SME clients in Bellville, Malmesbury and across the Western Cape – contact us for an appointment.
Frequently Asked Questions
What is the turnover tax threshold for 2026/27?
R2.3 million qualifying turnover, effective 1 April 2026, with the first R600,000 taxed at 0%. The ceiling rose from R1 million in Budget 2026.
Who qualifies for SBC tax rates?
Private companies, close corporations and co-operatives where all shareholders are natural persons, gross income stays under R20 million, and the business is not a personal-service or holding company.
Can a company use turnover tax instead of SBC?
Yes, if it meets the turnover-tax tests (turnover of R2.3 million or less, not a personal-service provider). Compare both calculations on your figures, since the cheaper option depends on your margins.
Does turnover tax replace provisional tax?
Yes. Turnover tax replaces income tax, VAT, provisional tax, capital gains tax and dividends tax with a single tax on turnover, paid in two instalments plus a final payment.
How do I register for turnover tax?
Register before the year of assessment starts on 1 March, or within two months of starting the business, on the SARS Online Query System or with a TT01 form at a SARS branch.