Registering for tax with SARS

To comply with taxes, a South African small business needs to follow several steps for registration, depending on its legal structure and whether it employs staff. This process ensures the business is recognised by the South African Revenue Service (SARS) and can meet its various tax obligations.

Here are the key steps required to register your small business for tax with SARS:

1. Register Your Business Entity

The initial registration process depends on whether your business is a separate legal entity or not.

What type of business do you have?

Legal entities

(e.g., Private Companies, Close Corporations, Co-operatives)

  • You must first register your business with the Companies and Intellectual Property Commission (CIPC).

Once registered with CIPC, SARS will automatically generate an Income Tax reference number for your business.

After receiving this, you must register on eFiling to conduct your tax transactions electronically.

It’s important to note that, as of 1 May 2011, no new Close Corporations (CCs) can be registered. Existing CCs, however, are treated as companies for income tax purposes.

These entities are considered separate legal personalities and must register as taxpayers in their own right.

Non-legal entities

(e.g., Sole Proprietorships, Partnerships): If your business is not a legal entity, such as a sole proprietorship or a partnership, it is not registered separately for income tax purposes.

  • If your business operates as a sole proprietorship or partnership, it is not registered separately for income tax purposes with SARS.
  • For a sole proprietorship, the business income is included in the owner’s personal income tax return, and the owner is responsible for the taxes.
  • For partnerships, each partner is individually taxed on their share of the partnership profits.

2. Register as an Employer (if you employ staff)

If your small business employs staff, you incur additional tax responsibilities and must register as an employer.

You have 21 days to register with SARS as an employer

Employer Registration Obligation

21 day deadline for registration

Required Registrations: You will need to register for:

Pay-As-You-Earn (PAYE): This is for deducting employees’ tax from their salaries. You can register for PAYE on eFiling by logging in, navigating to “SARS Registered Details,” selecting “Payroll taxes,” and then choosing “Add new product registration”.

Unemployment Insurance Fund (UIF): This provides short-term relief to workers in specific situations like unemployment or maternity. All employers liable to pay UIF contributions must register.

Skills Development Levy (SDL): This levy promotes learning and development in South Africa. Employers liable for SDL must register with SARS and indicate their Skills Education and Training Authority (SETA) jurisdiction. Even exempt employers are required to register.

  • Employer Registration Obligation: An employer must register with SARS within 21 business days of becoming an employer, unless none of the employees are liable for normal tax.
  • Required Registrations: You will need to register for:
    • Pay-As-You-Earn (PAYE): This is for deducting employees’ tax from their salaries. You can register for PAYE on eFiling by logging in, navigating to “SARS Registered Details,” selecting “Payroll taxes,” and then choosing “Add new product registration”.
    • Unemployment Insurance Fund (UIF): This provides short-term relief to workers in specific situations like unemployment or maternity. All employers liable to pay UIF contributions must register.
    • Skills Development Levy (SDL): This levy promotes learning and development in South Africa. Employers liable for SDL must register with SARS and indicate their Skills Education and Training Authority (SETA) jurisdiction. Even exempt employers are required to register.
  • Employment Tax Incentive (ETI): While not a separate registration in the same way, qualifying employers can claim this incentive, which reduces the cost of hiring young and less experienced work seekers, on their monthly EMP201 submission.
  • Changes in Registered Details: Any changes to your registered particulars (e.g., name, address, or ceasing to be an employer) must be communicated to SARS within 21 business days.

3. Consider Special Tax Regimes or Incentives

Small businesses may qualify for specific tax incentives or simplified tax systems:

  • Small Business Corporation (SBC) Incentive: If your private company, close corporation, or co-operative meets specific criteria as an SBC, it can benefit from preferential tax rates and other tax incentives. For example, an SBC pays no income tax on the first R79,000 of taxable income for years of assessment ending on or after 1 April 2019, with progressive rates applying thereafter.
  • Turnover Tax: This is a simplified system specifically designed for micro businesses with a qualifying annual turnover of R1 million or less. It replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax, and Dividends Tax, though businesses can elect to remain in the VAT system if they choose. Qualifying entities include individuals (sole proprietors), partnerships, close corporations, companies, and co-operatives. To register for Turnover Tax, a completed TT01 form must be submitted to SARS.
  • Accelerated Depreciation (Urban Development Zones – UDZ): Until 31 March 2021, businesses could claim an accelerated depreciation allowance for the cost of erecting, acquiring, or improving commercial or residential buildings within an approved urban development zone, provided the building was used solely for trade. While not a direct registration for tax, it’s a significant tax incentive. Specific forms (UDZ1 for erection/improvement, UDZ2 for purchase) needed to be completed and retained for five years after the return submission date where the deduction was claimed.

4. Record Keeping

  • All businesses must keep accurate records, books of account, or documents to comply with the Tax Administration Act and satisfy SARS. These records should be kept in their original form, in an orderly fashion, in a safe place, and be available for inspection or audit by SARS.
  • Generally, records must be kept for five years from the date of return submission. For businesses on Turnover Tax, the record-keeping requirements are reduced, needing only records of all amounts received, dividends declared, and a list of assets and liabilities exceeding R10,000 at year-end.

5. Seek Professional Help and Utilise SARS Resources

  • Small business owners can learn about taxes through SARS Tax Workshops and Mobile Tax Units (MTU) / Pop-up Branches which offer services in various locations.
  • It is highly recommended to deal with registered and reputable tax practitioners for tax matters. From our conversation history, seeking professional guidance from accountants or financial advisors is advisable, especially for those with limited financial literacy, as they can provide strategic advice, ensure compliance, and assist with complex financial decisions.
  • For more information or assistance with specific queries, businesses can call the SARS Contact Centre.