Do small business rates apply to sole proprietors?

Content provided by a guest contributor.

Firstly let it be understood, I am no expert on tax and I am not a tax consultant.  That said, there are issues that even I understand on how we as SMME’s (small, medium, micro enterprises) can save ourselves some money.

Where ever we go, we hear people talking about how the tax man is messing with us, how our businesses are being ‘strangled’ by the tax man; how difficult it is for the small business owner to survive because of the taxes and how government should assist the SMME.

Well to be quite honest, every year I see evidence of just that! What I don’t see, is the SMME taking advantage of what has been offered. Perhaps it is just easier to moan and groan and blame someone else for our misfortune or the fact that we often don’t think about what we are doing.

Small businesses have preferential rates that are applicable, but one of the requirements is that the business must trade as a private company in order to qualify.

Now already I can see the eyes moving heaven ward. Think about it for a moment.  If your company is not registered as a company, how is SARS expected to know if your personal account is being used for a legitimate business or if on the face of it you have ‘created’ a business – which runs through your personal account, in order to claim the preferential rates?  Come on now be fair – registering your business, tells SARS that yours is a legitimate business.

As a registered business, SARS is now able to award you the preferential rates.  This means that instead of paying maximum of 40% as an individual or Sole Proprietor, as a registered Private Company you get to pay a maximum of 28%. The reality of this is a saving of 12% on your bottom line and I am sure that you will agree with me that that is not to be sniffed at.

Now I can hear all of you saying, “yes, but now I am paying 40% as an individual and 28% as a business!”  Well not really hey, especially if you are doing your books correctly!

Firstly, you should be claiming all of the expenses and allowances that you are entitled to, through your business. This should leave you in your personal capacity, with only the personal expenses and incidentals that you cannot claim through your business and then this should form the ‘salary’ that your business pays you on a monthly basis. 

Now here comes the interesting part – if your ‘salary’ is less than the minimum, then you don’t pay tax as an individual at all. So I urge you as SMMEs to go and register your business, then register your business as an employer and employ yourself.  Following the rules and the guidelines, will mean huge savings in taxes. 

Huge savings in taxes will also increase your productivity too! Why increased productivity you may ask?  Well that’s a simple one to answer – you see all the time that you used to spend moaning and groaning about how badly the tax man is treating you can now be used to sell more product and/or your services.

The bottom line of course is that you – yes you – need to change your mindset and work with the system.  You will find it far more rewarding than the constant butting your head against a brick wall.

The content in this article is provided by Nikki Viljoen, an Internal Auditor and Business Administration Specialist, and the owner of Viljoen Consulting.

About Viljoen Consulting:

Viljoen Consulting is a specialist Internal Audit company. It was established to provide access to Internal Audit functions, primarily targeting the SMME market, that were previously only enjoyed by large companies and corporations who could afford an Internal Audit Division. Viljoen Consulting recognizes the absolute necessity for SMMEs to implement best practices in respect of policies, procedures, flows, controls and other preventative practices, thereby protecting the company from possible fraud and other related losses.

Viljoen Consulting‘s services include bookkeeping, internal auditing, small business start-up, business sophistication assessments, and legal compliance.

For more information, contact:

Tel: 083 702 8849



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