Tax Bill Calculation for Companies and Small Business Corporations

What is the tax bill for a company with a taxable income of R700,000? And what about for a small business corporation with the same taxable income?

a. R208,080; R196,000

b. R208,080; R208,080

c. R189,000; R98,198

d. R101,245; R196,000

e. R196,000; R196,000

Answer:

The tax bill for a company with a taxable income of R700,000 is R208,080, while the tax bill for a small business corporation with a taxable income of R700,000 is R196,000.

To calculate the tax bill for a company with a taxable income of R700,000, we need to determine which tax bracket it falls into. Based on the given tax brackets, the company's taxable income falls into the range of R550,001 and above. So, we'll use the formula for this bracket: 57,698 + 27% of the amount above 550,000. The tax bill for the company is calculated as follows: R57,698 + (27% * (700,000 - 550,000)) = R208,080.

For a small business corporation with a taxable income of R700,000, we need to consider that it falls within the tax bracket of R365,001 - R550,000. So, we'll use the formula for this bracket: R18,848 + 21% of taxable income above 365,000. The tax bill for the small business corporation is calculated as follows: R18,848 + (21% * (700,000 - 365,000)) = R196,000.

As we can see, the tax bill for the company is slightly higher than the tax bill for the small business corporation with the same taxable income. It is important for businesses to understand these tax calculations to effectively manage their finances and plan for tax obligations.