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Thread: Income tax as sole proprietor

  1. #1
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    Income tax as sole proprietor

    I run a small business making a turnover of around R750k a year. The business is not registered which according to my understanding would fall in the category of being a Sole Proprietor. As a sole proprietor i have read that I only need to be registered for income tax on myself as the owner and no tax should be paid on/from the business. Is this correct?

  2. #2
    Site Caretaker Dave A's Avatar
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    Yes - you and the business are effectively one and the same person.

    Just remember that you will be paying tax on the business's profits, and not your drawings. Depending on your line of business and margins, you might also consider registering for turnover tax instead of going the ordinary income tax route.
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  3. #3
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    Just what Dave A said.

    You definitely need to seak the advice of a tax consultant. Your best option would depend on your estimated figures for the subsequent years.

    For example:
    Using a turnover of R750k, if your bottom line taxable profit is more than R150,000 then it's is better to be in the turnover tax system.
    In fact, you will pay less tax using a Private Company and using the Small Business Corporation Tax. But then will the tax saving be sufficient to cover any cost to prepare the Annual Financial Statements assuming you are exempt from Review.
    You also need to take into account what other earnings you have as you need to utilise your annual tax rebate and this will effect how much profits to retain in the company.

    Using a turnover of R750k, if your bottom line taxable profit is around R200k, then the best option swings towards the turnover tax system as opposed to the Small Business Corporation tax rates.

    The best option that would suite you in complately variable based on your projected figures.


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