On 23 February 2022, during the budget speech, the Minister of Finance announced that the corporate income tax rate would be reduced from 28% to 27%. The changes would be effective for years of assessment ending on or after 31 March 2023. Therefore, the following changes will take place for Companies and Small Business Corporations as of 1 April 2023.
Companies
For companies with a year of assessment ending on or before 31 March 2023, the tax rate remains 28%. For companies with a year of assessment ending on or after 1 April 2023, the rate of tax is 27%.
Due to the 1% deduction in companies tax, capital gains tax in companies will decrease from 22.4% to 21.6%. However, this is still higher than the rate of capital gains tax of 18% for Individuals and Special Trusts, but lower than the 36% for Other Trusts.
This means that shareholders that receive dividends will be paying less tax, as the effective tax rate will decrease from 42.4% to 41.6%.
Small Business Corporations
Small Business Corporations with a year of assessment ending on or before 31 March 2023: Taxable income of R550 001 and above receives a tax rate of R58 013 + 28% of the amount above R550 000.
Small Business Corporations with a year of assessment ending on or after 1 April 2023: Taxable income of R550 001 and above receives a tax rate of R58 013 + 27% of the amount above R550 000.
Tax can be intricate and challenging to navigate. CMV has the expertise to assist you with any of your tax queries. Please feel free to contact us – we help each business with its unique tax needs.