Turnover tax is a simplified system aimed at making it easier for micro business to meet their tax obligations. The turnover tax system replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax for micro businesses with a qualifying annual turnover of R 1 million or less. A micro business that is registered for turnover tax can, however, elect to remain in the VAT system (from 1 March 2012).
Turnover tax is worked out by applying a tax rate to the taxable turnover of a micro business. The rates are applicable for any year of assessment ending during the period of 12 months ending on 28 February 2018:
|Turnover (R)||Rate of tax (R)|
|0 – 335 000||0%|
|335 001 – 500 000||1% of each R1 above 335 000|
|500 001 – 750 000||1 650 + 2% of the amount above 500 000|
|750 001 and above||6 650 + 3% of the amount above 750 000|
Who is it for?
Micro businesses with an annual turnover of R 1 million or less. The following taxpayers may qualify:
- Individuals (sole proprietors)
- Close corporations
How to register?
To register for Turnover Tax:
- Do a quick test to see if your quality for turnover tax
- Fill in Application for turnover tax form (Manual/ Online)
What records should be kept?
A big advantage of turnover tax is the reduced record-keeping requirements. The following records must 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 at the end of the year of assessment as well as of liabilities exceeding R10,000.
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.
Registering business for tax
- It is mandatory for any business to register for VAT if the income earned in any consecutive twelve-month period exceeded or is likely to exceed R1 million.
- Any business may choose to register voluntarily if the income earned, in the past twelve-month period, exceeded R50 000.
- A small business that is registered as a micro business under Schedule No. 6 of the Income Tax Act may also register for VAT and may elect to submit returns and payments every four months, ending on the last day of June, October and February.
Registering for PAYE/SDL/UIF
Registering as an Employer
According to law, an employer must register with the South African Revenue Service (SARS) within 21 business days after becoming an employer, unless none of the employees are liable for normal tax.
Registering as a branch
Where an employer has, for registration purposes, applied for separate registration of branches of the enterprise, each branch is a separate employer.
To register as a branch separately from the main branch, an application for Branch Registration must be filled in and sent to SARS.
Change of registered details
An employer must let SARS know within 21 business days of any (e.g. change of name, address or when no longer operating as an employer, etc.).
Registration for SDL and UIF
An employer, who needs to register with SARS, for PAYE and/or SDL, also needs to register to pay UIF contributions. – Source: SARS.gov
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Until next week, bye-bye for now.
Tebello “PandaPreneur” Hlalele
Business Collumnist: FS News Online
Tebello is writing featured articles for FS News Online, weekly. He covers various Business related topics and answer relevant questions.
About the Author: Tebello Hlalele, a 22 year old entrepreneur, student and future leader from Meloding Virginia, currently residing in Bloemfontein. He is currently leading a programme called “Hustle on the move”. He aim is to get entrepreneurs in the Free State to reach their desired destinies. He also has a 30 minutes slot with Ace Moloi on Kovsie FM every Friday that interacts with entrepreneurs regarding their challenges.