Discover essential strategies for South African SME owners to navigate the upcoming tax season successfully, ensuring compliance and maximising savings. File photo.
South Africa’s three million-plus entrepreneurs, who already juggle multiple responsibilities every day, face an onerous additional task in February: paying their companies’ first provisional tax charge for the financial year. For many small- and medium-sized enterprise (SME) owners, this obligation is a ‘double whammy’.
Not only do they have to check the calculations provided by the SA Revenue Service (Sars) – no mean feat for those who do not have a background in taxation – they also have to pay what they owe. Failure to do so will incur penalties and interest charges that will, in turn, make the following tax deadline an even bigger obstacle.
Nicole Swart, managing director at asset-free working capital provider Merchant Capital, says that if SME owners have not made monthly allowances for their provisional tax payments, then finding the lump sum can mean a massive dent in their bottom line, or it could prompt them to look for short-term funding solutions.
Swart advises that proactive planning, the right advice and support, and a clear understanding of tax requirements will stand entrepreneurs in good stead when it comes to next year’s tax responsibilities. Here are her top tips for SME owners who want to make the 2026 tax season as stress-free as possible:
Work with a tax expert to understand what you may be liable for, and when payments are due. The different types of tax are all based on different factors and have different due dates. As a quick guide, provisional tax is payable in February and August and is levied on companies that do not have PAYE deducted monthly from employees’ salaries; PAYE is, however, a compulsory tax for all companies that have employees.
Companies whose annual turnover exceeds R1 million must pay VAT on their sales but some of it can be claimed back against business expenses. All SMEs must pay income tax, levied at a flat rate of 28% unless they qualify as small business corporations or they earn less than R1 million annually, in which case their rate is lower. Additionally, SMEs that bring in less than R1 million annually can opt to pay turnover tax, which is a simplified system that replaces all other taxes except PAYE.
Keep accurate financial records throughout the year. Invest in cloud-based accounting software or keep an accountant on retainer to manage the required financial records, receipts, invoices, and previous tax filings. Incomplete or disorganised records can make tax season challenging and increase the risk of audits, penalties, and disputes.
Take advantage of tax deductions, allowances, and incentives. It is worth consulting a professional accountant to identify any tax-saving opportunities, from claiming for business expenses like rent, utilities, marketing, and salaries, to applying for breaks afforded to SMEs that do research and development.
Plan your cash flow and automate payments. Exercise financial discipline and put money aside every month, in a separate account if necessary, so that you have a reserve to draw from when tax becomes payable. Automating these monthly payments into your savings account, as well as payments from that account to Sars in the months when tax is due, means that you are less likely to incur penalties.
“If tax season is putting a strain on your SME’s cash flow, a Cash Advance can help tide you over,” says Swart. “Merchant Capital’s funding solutions can help to settle your Sars obligations on time, with repayments that are tailored to your SME’s unique circumstances and are designed not to impact your day-to-day operations.”
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