With the South African Revenue Service (SARS) becoming more stringent about collecting tax at a time when the fiscus is in dire need of additional funding, it is increasingly using technology to ensure that neither individuals nor companies evade their responsibilities.
South Africa’s tax system, like many worldwide, relies on self-reporting. Taxpayers are expected to declare their income, claim deductions, and file returns based on accurate and honest financial records.
However, just as taxpayers have a responsibility to pay tax, so too does SARS need to treat entities with respect and transparency.
Tax revenue is critical for the functioning of the country. It funds essential services such as education, law enforcement, and healthcare. For the tax year ending 28 February 2025, SARS is expected to collect close to R2 trillion in revenue. Despite this significant target, SARS has already refunded R10.6 billion to taxpayers who were auto assessed and qualified for returns. This shows that SARS expects compliance yet honours entitlements.
By 21 July, SARS had completed auto-assessments for around 5.8 million of the country’s 7.5 million registered individual taxpayers by making use of technology to save them the time of collating documents and submitting returns. For those who fall outside this category and have more complex tax requirements because they run small business operations, they will have to collate documentation and submit through eFiling.
And everyone, from those who have been auto assessed to micro and small businesses that need to still file, has the right to object to the outcome should they receive an assessment they believe is inaccurate, such as for disallowed deductions.
However, it is first important to understand how SARS considers various entities as there are various types of companies for which different regimes apply. Among these are those known as micro businesses, which are taxed based on turnover. Here, a business qualifies for turnover tax if it is a natural person (such as being run as a sole proprietorship), or a company with an annual turnover of no more than R1 million, pro-rated if it trades for less than a year.
This simplified regime replaces income tax, provisional tax, and capital gains tax, while still allowing VAT registration where relevant, and applies progressive rates based on turnover bands to reduce compliance burdens for small enterprises.
| Taxable turnover | Rate of tax (R) |
| R1 – R335 000 | 0% of taxable turnover |
| R335 001 – R500 000 | 1% of taxable turnover above R335 000 |
| R500 001 – R750 000 | R1 650 + 2% of taxable turnover above R500 000 |
| R750 001 and above | R6 650 + 3% of taxable turnover above R750 000 |
Another type of company within the small business range is a Small Business Corporation (SBC), which is required to be a private company, close corporation, co‑operative, or personal liability company. It must have only natural people – no other companies – as shareholders and members may not hold interests in other companies, except listed companies. Its annual gross income may not exceed R20 million.
In addition, for a company to qualify as SBC, no more than 20% of its income and capital gains may come from investment income or income from rendering personal services and such company is not a “personal service provider” as defined in the Fourth Schedule to the Income Tax Act.
SBCs benefit from two main tax concessions:
- Progressive tax rates
They are taxed at favourable progressive rates, which typically reduce their overall tax liability compared to standard corporate tax rates.
| Taxable Income (R) | Rate of Tax (R) |
| R1 – R95 750 | 0% of taxable income |
| R95 751 – R365 000 | 7% of taxable income above R95 750 |
| R365 001 – R550 000 | R18 848 + 21% of taxable income above R365 000 |
| R550 001 and above | R57 698 + 27% of the amount above R550 000 |
- Accelerated depreciation for manufacturing assets
SBCs may claim a 100% deduction in the year of assessment for qualifying plant or machinery used directly in manufacturing (excluding mining or farming). Alternatively, they may apply the standard wear‑and‑tear allowance or the 50:30:20 accelerated depreciation allowance.
Where a micro or small business is aggrieved by an assessment raised by SARS, it is entitled to object against the assessment. Prior to lodging the objection, taxpayer (micro or small business) should first request reasons for the assessment, which assists in preparing a formal objection.
When challenging a SARS assessment, the onus lies with the taxpayer to demonstrate why a particular amount should not be taxed or why a deduction is justified. SARS bears the burden of proving that its estimated assessment is reasonable or proving facts on which penalties applied are based.
An objection must be made through SARS’s eFiling platform or at a branch office and must be lodged within 80 business days of receiving the notice of an assessment. SARS may fully allow the objection, partially allow it, or reject it entirely. In all cases, a written notice of outcome will be provided, including information about the appeal process. Should the taxpayer be dissatisfied with the objection outcome, they have the right to appeal.
In cases where a taxpayer is unable to settle the amount owed in full, SARS allows for payment arrangements. These can be made via the eFiling system and cover a range of tax types, including Company Income Tax, VAT, and personal Income Tax. To request a deferral, the taxpayer must specify the amount to be paid, the date of the first instalment, and the reasons for requesting deferral of payment.
The tax system is built on principles of fairness, transparency, and accountability. The introduction of AI and data-sharing agreements strengthens SARS’ ability to enforce compliance, but it also ensures that taxpayers are not overburdened unfairly. With sound advice, proper documentation, and timely action, taxpayers can confidently navigate the tax season and ensure their contributions support both their own financial well-being and the broader economic good.