What is it?
Turnover tax is a simplified tax system aimed at small businesses, making it easier for them to comply with their tax obligations. The criteria to qualify for this taxation is a turnover of R1 million or less. It replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax. A micro business that is registered for this kind of tax can, however, choose to remain in the VAT system.
For who?
It is available to qualifying individuals (sole proprietors), partnerships, close corporations, companies and co-operatives. There are certain reasons that can disqualify you from this tax relief. These can be found in paragraph 3 of the Sixth Schedule to the Income Tax Act. Please contact us for more information of these.
To take account of the typical expenses incurred by a micro business and to eliminate the need for detailed recordkeeping of deductible tax expenses, the turnover tax rates are significantly lower than the tax rates under the standard tax system. These are detailed below.
This tax system is worked out by applying a tax rate to the taxable turnover of a micro business. The rates for year ends ending between 1 March 2021 to 28 February 2022 are as follows:
| Turnover | Marginal Rates for 2015 |
| R0 – R335 000 | 0% |
| R335 000 – R500 000 | 1% of taxable income above R335 000 |
| R500 001 – R750 000 | R1 650 + 2% of taxable income above R500 000 |
| R750 001 and above | R6 650 + 3% of taxable income above R750 000 |
To register, an application should be sent before the beginning of a year of assessment (from 1 March to 28 February). This date may changed by the Commissioner in a Government Notice.
What happens if I am already trading?
If there is a new micro business that wants to register for this tax system and has started trading activities during a year of assessment, an application must be sent within two months from the date that business activities started. Existing micro businesses can register for / switch to this tax system before the start of a new tax year
A person may elect to voluntary de-register before the beginning of a year of assessment or a later date announced by the Commissioner in a Government Notice. A business may be forced to deregister if your turnover exceeds R1 million for a given tax year or certain qualifying criteria is no longer met. In the case of a compulsory deregistration, the business will be deregistered from the beginning of the month following the month during which they no longer qualify for turnover tax.
Take Note: If a person has been deregistered (voluntary or compulsory) from turnover tax, they may not be registered as a micro business again.
When must this Tax be paid?
Two interim payments, the first in the middle of the tax year (31 August), the second at the end of the tax year (28/29 February) must be made based on the estimated turnover of the business for that tax year.
After the end of the tax year, a turnover tax return that reflects the actual taxable turnover of the business must be completed. Any shortfalls / overpayments then become payable / refundable. The Payment Advice will help with this and other matters relating to payments.
A major benefit of this tax is the reduced record-keeping requirements. The following records should be kept:
- Records of all amounts received
- Records of dividends declared
- A list of each asset with a cost price of more than R10,000 on hand at the end of the year of assessment as well as of liabilities exceeding R10,000.
For all the necessary forms and more detailed information, please contact us.
All information is also available on the SARS website.
This post was updated on 7th April 2021