With the start of tax season, many people are looking for legal ways to reduce their tax burden, with entrepreneurs and temporary taxpayers having greater flexibility when claiming expenses.
With the start of tax season, many people are looking for legal ways to reduce their tax burden, with entrepreneurs and temporary taxpayers having greater flexibility when claiming expenses.
For employed workers, tax season is relatively straightforward because employers withhold tax through the Pay-As-You-Earn system throughout the year. However, entrepreneurs must independently assess their taxable income, ensuring they claim all legitimate deductions without exceeding the limits set by the South African Revenue Service (SARS).
The automated assessment system opened at the beginning of this month, and filing deadlines for other taxpayers are available from July 13th. Taxpayers who receive an automatic assessment have until July 12th to review, accept, or dispute it. Non-resident taxpayers must submit their returns by October 23, 2026, while temporary taxpayers, including many entrepreneurs, freelancers, investors, and landlords, have until January 22, 2027.
SARS applies a fairly simple criterion to business deductions: the expense must be incurred while earning income and must be directly related to the taxpayer's activities. Personal, private, and household expenses are generally not deductible, and expenses that have both business and personal use can usually only be claimed for the portion related to earning income.
It is important to understand that deductions do not mean reimbursement of spent amounts from SARS; instead, they reduce your taxable income, so the value of the deduction depends on your marginal tax rate. Entrepreneurs face tax brackets similar to employed workers: income up to R245,000 is taxed at 18%, and exceeding the threshold of R1 million incurs a tax of R251,258 plus 41% of any taxable income exceeding R857,900.
Before considering unusual deductions, entrepreneurs should ensure they are utilizing basic tools. Retirement annuities, pension funds, and endowment policies remain among the most effective methods for reducing taxable income, provided legislative restrictions are met.
Tax-advantaged accounts do not immediately reduce taxable income, but investment growth within them is exempt from tax on interest, dividends, and capital gains. It is also recommended to review medical tax credits, approved charitable donations, and any legitimate business expenses before filing a return.
Regarding a home office, the possibility of claiming a deduction depends on the workspace meeting SARS requirements. Generally, a dedicated area used exclusively and regularly for business is required; if part of the home is used for both personal and business purposes, a deduction is possible only for the portion corresponding to the business purpose.
The situation with mobile phones is ambiguous. If you use a phone for both work and personal calls, SARS generally expects only the portion related to business use to be claimed. Buying coffee for a client may be possible, but this does not automatically make it a business expense; the meeting must be directly related to earning income, and the expense must be properly substantiated.
Laptops are generally eligible for deduction. Computers and other equipment used to generate income may qualify for a deduction, although some assets are depreciated gradually through depreciation allowances rather than as an immediate deduction. What about a dog? A family pet almost certainly will not qualify. However, circumstances change if the animal genuinely participates in generating business income—for example, regularly appearing in commercial advertising, being professionally used in performances, or being livestock necessary for the business.
If a dog spends most of the day sleeping on the sofa, do not expect SARS to cover the veterinary bill. As with any other deduction, the taxpayer must demonstrate that the expense was incurred while earning income.
The firm Legal & Tax, a legal and tax consultancy in South Africa, distinguishes between legal tax planning, tax evasion, and tax avoidance. While taxpayers have the right to structure their affairs effectively and utilize legally provided deductions, tax evasion—including hiding income or inflating deductions—is illegal. South Africa's anti-tax evasion rules also allow SARS to disregard schemes created primarily for tax benefit.
Latita Africa, a financial and tax consulting firm, notes that taxpayers can legally lower their tax burden through contributions to pension funds, tax-advantaged accounts, approved charitable donations, and relevant business deductions, but every claim must be properly documented.