As part of our service offering to clients, Acredo Consulting provides regular educational information based on the most frequently asked questions from our clients. This month we have an in-depth look at Turnover Tax, a system recently implemented by SARS.
What is it?
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 2017:
|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|
Table 1: Turnover Tax Rates for any year of assessment ending during the period of 12 months ending on 28 February 2017.
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: Contact Acredo on 012) 942 0660 or Ground Floor 8, Ashford House, 7 Ashford Street, Midstream Estate, 1692|
When should an application for registration be submitted?
It should be sent before the beginning of a year of assessment (a year of assessment runs from 1 March to 28 February), or a later date that may be determined by the Commissioner in a Government Notice.
The timing differs slightly for new registrations and existing registered businesses:
- New businesses: Should a new micro business start trading during a year of assessment and wishes to register for turnover tax, an application must be sent within two months from the date that the business started.
- Existing businesses: existing micro businesses can register for or switch to turnover tax before the start of a new tax year.
When to submit returns?
There are three submission dates:
- 1st payment is in the middle of the tax year on the last business day of August i.e. 29 August 2014 on the TT02 – Payment Advice for Turnover Tax
- 2nd payment is at the end of the tax year on the last business day of February i.e. 27 February 2015 on the TT02 – Payment Advice for Turnover Tax
- Final payment is after the annual TT03 – Turnover Tax Return is submitted and processed
What records should be kept?
A big advantage of turnover tax is the reduced record-keeping requirements. The following records must be kept:
1. Records of all amounts received;
2. Records of dividends declared;
3. Lists of assets and liabilities exceeding R10,000 in cost value at the end of the year of assessment.
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
How do I de-register from Turnover Tax?
You can deregister from Turnover Tax voluntarily by writing to the Commissioner expressing your wish to do so in a manner prescribed by the Commissioner. Or, you may be forced to deregister if your turnover exceeds R1 million for a given tax year.
Contact us to discuss if your business qualifies for Turnover Tax: