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A Fin24 user wants to know the tax implication for his own business when he is also appointed as director of an NPO. He writes:
If someone owns a business, director etc, and now gets appointed as a director of a NPO (Nonprofit Organisations) will the tax status for his other business also change to 28% or is that exempt still, so in other words will his current business still remain a SBC (Small Business Corporation).
Marc Sevitz of TaxTim responds:
Being a director will not change the SBC status of your business. The law requires that holders of shares not have other interests, subject to certain exclusions, in order for the SBC status to be revoked.
An SBC is a Small Business Corporation, which refers to a specific type of entity for tax purposes. Businesses that make turnover of less than R20m per year and have shareholders who do not hold any other shares in any other companies aside from some minor exceptions such as unit trust shareholders, qualify for the special graduated tax rates allowed for a SBC.
For the 2015 tax year the first R70 700 of taxable profit is tax free and thereafter the rates go from 7%, 21% to the eventual corporate tax rate of 28%. SBCs are also entitled to accelerated write-offs for assets used in the production of income which would see lower tax being paid in the first few years, enabling small businesses to grow faster with the cash they have.
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