How to Register a Sole Proprietorship in South Africa

South Africa, or officially the Republic of South Africa, is the second-largest economy on the African continent ranked by nominal GDP.

It is the powerhouse of Africa and very much the driving force behind this expansion of the whole continent, with the most advanced, broad-based economy. With that said, South Africa is a great place to start a business. We have gathered all the important information you need to start a sole proprietorship business. 

Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take

Sole proprietorship in South Africa

A sole proprietorship is a business owned and operated by a natural person and is the simplest form of business type. The income from such business should be included in the owner’s income tax return and the owner is responsible for the payment of taxes thereon. The owner assumes the business risks to the extent of all of the owner’s assets, whether used in the business or not. 

Some advantages of a sole proprietorship: 

• Simple to establish and operate
• The owner is free to make decisions
• There are minimum legal requirements
• The owner receives all the profits
• It is easy to discontinue the business

How to register a sole proprietorship in South Africa

A sole proprietor registers and operates a business on their own. Considering that a sole proprietorship is not a legal entity, registration is not necessary apart from the standard legal and tax requirements. 

However, you will be required to register the business with the South Africa Revenue Service (SARS) for purposes of tax returns.

To start a business, you will need the following documents:

• ID or passport of the applicant
• Power of attorney to sign all the related documents

As a registered taxpayer, you can sign up through the SARS eFiling service, which allows you to file a tax return, make payments to SARS, request a tax clearance certificate, and access many other benefits.

The taxation system in South Africa

Performing business activities in South Africa through a sole proprietorship may represent a suitable setup in a competitive and appealing market. It is good to know that sole traders are subject to low taxes, compared to medium and large companies in South Africa.

Small business corporations that meet the requirements (including only natural persons as members/owners and with gross income of not more than ZAR 20 million) are taxed at the following rates for tax years ending before 31 March 2024:

• 0% on the first ZAR 95,750 of taxable income.
• 7% on taxable income above ZAR 95,750 but not exceeding ZAR 365,000.
• ZAR 18,848 + 21% on taxable income above ZAR 365,000 but not exceeding ZAR 550,000.
• ZAR 57,698 + 27% on taxable income exceeding ZAR 550,000 (for tax years ending on or after 31 March 2023).

These tax rates are much lower compared to the 28% rate that medium and large companies pay.

Any business must register for VAT if the income earned in any consecutive twelve-month period exceeded or is likely to exceed R 1 million​. Any business might choose to register voluntarily if the income earned in the past twelve-month period exceeded R 50,000. VAT is levelled at a standard rate of 15% on the supply of goods and services by registered vendors.