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Is my company a micro business or small business for SARS classification?
Is my company a micro business or small business for SARS classification?
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Direct answer
For ITR14 return customisation, SARS classifies a micro business and small business using the company type, income or turnover measure and total assets for the relevant year. SARS currently describes a micro business as a qualifying company with qualifying turnover not exceeding R1 million and total assets not exceeding R5 million, subject to exclusions for body corporates and share block companies. It describes a small business, for relevant modern years, using gross income not exceeding R20 million and total assets not exceeding R10 million, again subject to its stated classification exclusions.
These are ITR14 administrative categories. A SARS small business classification is not the same as qualifying as a Small Business Corporation under section 12E, and it does not itself prove eligibility for turnover tax or a tax incentive.
What this means in practice
The ITR14 eFiling process uses initial questions to create a return suited to the company's classification. Entering the wrong income, asset or company-type answer can create the wrong return sections and lead to missing information later in the process.
The terms can be confusing because the company may describe itself as "small" commercially, be registered for turnover tax, or consider itself an SBC, while SARS uses a different classification to customise its ITR14. Treat each test separately. The decision should be based on the current SARS form, guide and the company's financial records for the relevant year.
For classification, prepare a clear record of gross income or qualifying turnover, total current and non-current assets, and the company's legal type. Do not use a cash-flow forecast or a prior-year figure as a replacement for the return-year records.
Step-by-step
- Confirm the return period and company type.
Identify the year of assessment, financial year end and whether the company is dormant, a body corporate, share block company or another company type. A company that traded for part of the year may not meet the dormant description.
- Calculate the relevant income measure.
Use the SARS guide's wording. For small business classification, SARS refers to gross income, which includes sales or turnover plus other income. For micro business classification, it refers to qualifying turnover. Keep the working papers that reconcile the figure to the financial statements and tax computation.
- Calculate total assets.
Prepare a current and non-current asset schedule at the relevant year end. Include the values required by the ITR14 guidance and retain the balance-sheet support.
- Complete the ITR14 form wizard accurately.
Answer the company-type, income and asset questions from the prepared schedules. Review the displayed return type before continuing. If an answer changes, eFiling can change or remove sections, so correct the data before completing detailed schedules.
- Keep separate tax-status workpapers.
If the company intends to claim a Small Business Corporation allowance, use the specific legal eligibility test. If it considers turnover tax, use the separate turnover-tax rules. Do not use the ITR14 return type as the answer.
- Reconcile before submitting.
Reconcile the figures entered in the form wizard to the financial statements, trial balance and tax computation. Retain a copy of the completed return and the classification working paper.
Documents and records to keep
Keep annual financial statements, trial balance, income reconciliation, asset register, balance-sheet schedule, company registration records, ITR14 working papers and relevant tax computations. If the company has changed structure or activity during the year, keep the documents explaining the change.
Important limits and exceptions
The thresholds and form behaviour are specific to SARS's ITR14 guidance and the relevant period. Do not apply a historic threshold to a current return without checking the current guide. A body corporate, share block company, dormant company or company that exceeds a stated limit may fall into a different return category.
Most importantly, return classification does not decide every tax benefit. Small Business Corporation, turnover-tax, VAT and other tax rules have separate conditions.
When to get tailored advice
Get advice where the financial statements are incomplete, income is near a threshold, assets have been revalued, the company changed activities, the return type appears inconsistent, or the company wants to claim a specialist small-business tax benefit. Obtain review before submission if an earlier return was classified incorrectly.
TaxProof can help assemble the financial records and ITR14 classification workpapers. We cannot confirm Small Business Corporation or turnover-tax eligibility without full facts.