Tax is one of the least discussed aspects of farming, yet it affects every business regardless of size. Many small-scale farmers either overlook tax or see it as a burden that can be postponed. Unfortunately, ignoring tax obligations can lead to penalties, audits and difficulties accessing finance. Understanding how tax works, what needs to be submitted and when helps farmers stay compliant and take advantage of available benefits.
By Molisa Cheda, Founder and Managing Director of Vanguard Legal
Compliance with tax laws builds credibility. Banks, grant providers and large buyers often require proof that a farmer is tax compliant before doing business. Farmers who submit returns on time and keep their affairs in order are better positioned to secure funding and expand operations. In addition, the South African Revenue Service (SARS) allows deductions for certain farming expenses, which can reduce taxable income.
Also read: Lease and land-use agreements for farmers: All you need to know
Registration and Record-keeping
Every farmer who earns an income must register with SARS. If the farm is run as a company or cooperative, the entity itself must be registered. Good record-keeping is essential. Farmers should keep receipts, invoices and payroll records. These documents are necessary to support tax returns and to calculate deductible expenses.
Provisional Tax and Returns
Farmers are usually required to pay provisional tax twice a year. This is a system where estimated tax is paid in advance based on expected income. Provisional tax payments are typically due in August and February, with a possible third payment in September to correct any shortfall. Final annual returns must also be submitted by the deadlines set by SARS, which vary depending on whether filing is done online or manually.
VAT and Turnover
If a farming business earns more than R1 million in a 12-month period, VAT registration is compulsory. Farmers who are VAT registered must charge VAT on sales and can claim back VAT on qualifying expenses. Even if turnover is below the threshold, voluntary VAT registration may be beneficial if the farmer deals with VAT-registered suppliers or buyers.
Also read: Business registration and structuring for farmers: All you need to know
Understanding Tax Brackets
For sole proprietors and partnerships, profits are taxed under personal income tax. This means farmers pay according to the same tax brackets as individuals, with higher rates applying to higher income levels. For private companies, a flat corporate tax rate applies. Choosing the right business structure is therefore important, as it directly affects how much tax is paid.
Benefits of Compliance
Farmers often focus on the costs of tax, but there are benefits too. Deductible expenses can include seeds, fertiliser, feed, repairs and even some equipment costs. Farmers who keep proper records can legitimately lower their taxable income and reduce the amount owed. Compliance also helps avoid penalties and ensures smoother dealings with banks and government agencies.
Farming by the Numbers
Tax is not just a legal obligation; it is part of running a professional farming operation. By registering, keeping good records, paying provisional tax and understanding obligations, farmers protect themselves from unnecessary stress. Compliance gives peace of mind and strengthens the farm’s reputation as a serious and trustworthy business.
* Molisa Cheda is the Founder and Managing Director of Vanguard Legal, which is focused on providing simple and accessible legal support.
Disclaimer: The views expressed in this article are solely those of Molisa Cheda and do not necessarily reflect the views of African Farming or other associated parties.
Also read: You need to know: Compliance essentials for smallholder farmers
