Have you ever wondered how to calculate taxable income of a registered business, with our online calculator for taxable income of a registered business you can calculated your expected tax payable to SARS in just a few clicks?
In the language of income tax the taxable income of a business is slightly different to the profit of the business in that certain items of income are exempt from income tax and certain expenses are not allowable as deductions.
The basic formula for the calculation of taxable income for a a business is the same as that of an individual.
Remember that the profit of sole proprietorships and partnerships is taxed in the hands of the individual i.e. on their personal tax return ITR12; but corporations are taxed in their own capacity as they receive their own tax reference number upon registering with CIPC.
To locate your businesses tax reference number, you can follow these three easy steps here to locate your business income tax number.
Formula to calculate income tax for a business:
Gross Income
Less: Exempt Income
= Income
Less: Allowable Deductions
Add: Taxable portion of capital gains
= Taxable Income
The basic income statement of a business is as follows:
Turnover
Less: Cost of sales
= Gross Profit
Add: Other operating income including interest received
= Gross operating income
Less: Operating expenses including interest paid
= Net Profit
XXX
(XXX)
XXX
(XXX)
XXX
XXX
XXX
(XXX)
XXX
XXX
XXX
(XXX)
XXX
As can be seen exempt income or non-taxable income is subtracted from gross or total income to determine income. Allowable deductions are typically expenses such as retirement contributions and medical expenses for individuals and expenses from the income statement for businesses.
Allowable deductions can be of a capital nature (capital allowance) or a non-capital nature (revenue). After calculating income we must add the taxable portion of a capital gain. Taxable capital gain refers to the portion of the gain, arising from the disposal of capital assets, included in a taxpayer’s taxable income. Thus, the classification of income and expenses is slightly different in that they have to be allowable from a tax perspective.
Tax rates
Tax rates are amended on an annual basis with effect from 1 March each year, by the Minister of Finance, in the budget speech. It is critical when working with the different tax rates to apply the rates specific to the tax year in assessment.
Rates of tax applicable to normal companies and close corporations:
| Year of assessments ending during the following periods | Rates of Tax |
| 1 April 2022 onwards | 27% |
| 1 April 2008- 31 March 2022 | 28% |
| 1 April 2005 – 31 March 2008 | 29% |
| 1 April 1999 – 31 March 2005 | 30% |
| 1 April 1994 – 31 March 1999 | 35% |
| 1 April 1993 – 31 March 1994 | 40% |
Calculator
Use this simple calculator to discover the expected income tax payable to SARS.
We recommend that businesses submit provisional tax up to three times during the financial year as this reduces the tax burden of having to pay over a lump sum at the end of the financial year.
Provisional tax is submitted as per the below time schedules:
| Provisional Tax Period | Time Period |
| 2023/01 | 01/03/2022 to 31/08/2022 |
| 2023/02 | 01/09/2022 to 28/02/2023 |
| 2023/03 | 01/03/2022 to 28/02/2023 |
The first provisional tax payment must be made on or before the last day of the first six months of the current year of assessment.
The second provisional tax payment is due on or before the last day of the current year of assessment i.e. 28/02/2023.
The third provisional tax payment is voluntary and this submission is made primarily to prevent the payment of interest which would be incurred where the 1st and 2nd provisional tax payments fall short of the final tax due for the year.
Leave a Reply