South African company tax: planning from your books
The company tax rate for a South African company's year of assessment, and how to estimate the tax from your own books in Achekam during the year.
By Achekam · · 4 min read · For Running a business businesses in South Africa
For many owner-managed companies, company tax is a number that arrives once a year from the accountant, usually larger than hoped and always at an awkward time. It does not have to work that way. The books you keep every month already hold most of what you need for a sound estimate, as long as you know the rate, the adjustments, and the places where accounting profit and taxable income part company.
This article is for South African company owners and finance managers who want to see the tax coming, not just pay it.
27% for years ending on or after 31 March 2023, 28% before
South Africa taxes companies at 27% for years of assessment ending on or after 31 March 2023. For years of assessment ending before that date, the rate was 28%.
The test is the end of the year of assessment, not when the profit was earned. A company with a February year-end moved to 27% with the year that ended in February 2024, because its year ending in February 2023 closed before the cut-off; a company with a March year-end got the lower rate from the year ending 31 March 2023. If you are reworking an older year, check which side of the date it falls.
Small business corporations that qualify are taxed on a progressive table instead of the flat rate. SARS publishes its current income tax rates for companies, trusts and small business corporations by year of assessment; whether your company qualifies is a question for your tax practitioner.
Profit before tax from management accounts
The starting point is profit before tax. In Achekam, management accounts show an income statement for any period you choose, beside the period before, and a balance sheet at the period end. Both are added up from your own journals and can be exported as PDF or CSV.
One setting to watch: the year-to-date preset starts on 1 January, not on your company's own year start. A company whose year runs from March to February should choose its period dates by hand, or the "year to date" figure will mix two financial years.
For a mid-year estimate, run the income statement from the first day of your year of assessment to the end of the last closed month. That is your profit so far. Some owners then project the rest of the year from the same months last year; others use their budget, which is covered below.
Book depreciation is not tax wear-and-tear
Accounting profit is not taxable income, and the largest everyday difference is depreciation.
Achekam's fixed-asset register depreciates assets monthly, by straight line or reducing balance, with a journal each month, and posts the profit or loss when an asset is disposed of. That gives you a fair accounting charge. It does not work out tax wear-and-tear, which follows SARS's own rules and periods and can be quite different, particularly for vehicles, machinery and buildings.
So for the estimate:
- Take profit before tax from the income statement.
- Add back the book depreciation for the period.
- Deduct the wear-and-tear your tax practitioner calculates for the same assets.
- Adjust for other items your practitioner identifies as taxed or deducted differently.
- Multiply the result by 27%, or apply the small business corporation table if your company qualifies.
The result is an estimate, not an assessment, but it is far better than a guess. Fleet-heavy businesses will find the depreciation side explained further in depreciating a delivery fleet.
Profit not yet closed to retained earnings
There is no year-end closing entry in Achekam's books. Profit is not closed to retained earnings: it shows as its own line on the balance sheet.
That matters when you read a balance sheet after the year has ended. The profit line can hold more than one year's result, so a figure that looks like this year's profit may not be. When you estimate tax for the new year, take profit from the income statement for the new year's dates, not from the balance sheet, and let your accountant make the closing entry they need in the annual financial statements.
Budgeting for the tax through the year
Knowing the tax is half the job; having the cash is the other half. Your tax practitioner will tell you whether, when and how much tax your company must pay in advance during the year.
Achekam lets you set a budget per account and per period and compare it with the actual figures from your ledger. Two practical uses:
- Budget a monthly amount for income tax, based on your estimate, so the cost appears in your management accounts every month instead of in one painful month.
- Compare actual profit with budgeted profit each quarter, and update the tax estimate when they drift apart.
A simple habit helps more than any tool: move the estimated monthly tax into a separate savings account, and do not treat that money as available for anything else. Partners who review the monthly numbers together will find a routine for it in management accounts for a consulting partnership.
Your tax practitioner files the return
SARS collects tax in South Africa, and the company's income tax return is filed with SARS by the company or its tax practitioner. Achekam does not submit tax returns to SARS: the return is filed outside Achekam, and the filing is recorded afterwards. What Achekam gives you is clean books, management accounts and a fixed-asset register that make your practitioner's work quicker and the estimate believable.
What else a business still files itself is summarised in what a South African business still files with SARS. This month, run the income statement from the start of your year of assessment, add back depreciation, and send the figure to your practitioner with one question: what should we be setting aside?
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
