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Turnover Tax
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1. WHAT IS TURNOVER TAX?
Turnover Tax is a simple tax that was introduced for small businesses. The objective is to reduce the tax compliance and administrative burden by simplifying and reducing the number of returns that have to be filed. A typical business may currently be liable for submitting the following to SARS: 1) Value-Added Tax (VAT), 2) Income Tax, 3) Provisional Tax, 4) Capital Gains Tax (CGT) and 5) Secondary Tax on Companies (STC). The simplified tax system will replace all these taxes with a simple Turnover Tax for small businesses i.e. businesses with a turnover not exceeding R1 million per annum and who meet all the criteria. Micro business that have been in existence for more than two months can apply to register for the Turnover Tax for the 2011 year of assessment (commences on 01 March 2010) any time before 01 March 2010 whilst new business can apply for registration at any point as long as it is within two months from commencing business activities.
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2. COMPREHENSIVE GUIDE TO TURNOVER TAX
For detail information on Turnover Tax, please see our Comprehensive Guide to Turnover Tax.
See also a shorter summary of Turnover Tax in our Turnover Tax Flyer .
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3. THE BENEFITS OF TURNOVER TAX
If you qualify for Turnover Tax, you have to decide whether to remain with the current tax system or switch to the new Turnover Tax system. Factors that may help you to decide are:
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Record-keeping - if this is too much of a burden or too expensive, the Turnover Tax will be a better option;
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Meeting the requirements of the current tax system - if this is technically too difficult or too expensive to comply with, the Turnover Tax is a better option;
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Meeting the requirements of the current tax system by hiring a tax practitioner - if this is too costly then the Turnover Tax is a better option;
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The rates for the 2009/2010 year of assessment are as follows:
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Turnover |
Marginal Rates (R) |
| R0 - R100 000 |
0% |
| R100 001 - R300 000 |
1% of each R1 above R100 000 |
| R300 001 - R500 000 |
R2 000 + 3% of the amount above R300 000 |
| R500 001 - R750 000 |
R8 000 + 5% of the amount above R500 000 |
| R750 001 and above |
R20 500 + 7% of the amount above R750 000 |
To assist you further in your decision whether you want to remain with the current tax system or switch to the new Turnover Tax system, please see this case study of Ms X who is 34 years old and operates a clothing retail store as a sole proprietor (individual). The business is expected to make a turnover of R480,000 (excluding VAT R547,200 including VAT) for its first year of assessment that runs from 1 March 2009 to 28 February 2010.
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4. DO YOU QUALIFY FOR TURNOVER TAX?
Turnover Tax will be available to individuals (sole proprietors), partnerships, close corporations, companies and co-operatives. The qualifying turnover of such a business should not exceed the amount of R1 million in any year of assessment. Qualifying turnover is the total amount received by a business for the year of assessment from carrying on business activities. Turnover Tax is voluntary and you can choose whether you want to remain with the current tax system or change to the simplified tax system. if you choose to change to Turnover Tax, you need to register before the end of Febvruary to register for the following year of assessment. New businesses can register within two months of commencing business. To see whether you qualify for Turnover Tax, please complete this quick and easy questionnaire.
QUICK CHECK TO SEE IF YOUR BUSINESS QUALIFIES FOR THE TURNOVER TAX FOR A YEAR OF ASSESSMENT
By answering the following 12 questions you will be able to determine whether you meet the criteria to qualify for Turnover Tax. If the answer to any one of the questions is no, your business will not qualify for Turnover Tax for that year of assessment. For an interactive quick test, click here.
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QUESTION |
YES |
NO |
| 1 |
Will the qualifying turnover of the business be less than or equal to R1 million for the year of assessment? |
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| 2 |
Do you declare that the business is not registered for VAT or, if it is registered for VAT, that you are willing to deregister it for VAT? |
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| 3 |
Do you declare that the business does not render a professional service? |
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| 4 |
Do you declare that the business is not a personal service provider or a labour broker without a SARS exemption certificate? |
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| 5 |
Does the business trade in one of the following forms: sole proprietor, partnership, close corporation, company or cooperative? |
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| 6 |
If the business is a partnership, do you declare that all the partners will be individuals throughout the year of assessment? |
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| 7 |
If the business is a close corporation, company, or cooperative, do you declare that all of the shareholders/members will be individuals throughout the year of assessment? |
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| 8 |
Do you declare that the business is not a public benefit organisation or a recreational club? |
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| 9 |
Does the business have a year of assessment that ends on the last day of February? |
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| 10 |
Do you declare that the shareholders, members and the business do not hold shares/interests in another close corporation, company, or cooperative other than the following exceptions:
- Interests in listed South African companies;
- Interests in collective investment schemes;
- Interests in body corporates and share block companies;
- Interests in venture capital companies;
- Interests of less that 5% in social or consumer co-operatives;
- Interests of less that 5% in co-operative burial societies or primary savings co- operative banks; and
- Interests in friendly societies
- Interests in a company that did not trade during any year of assessment and which did not own assets with a total market value that exceeds R5 000 during any year of assessment. |
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Do you declare that the investment income is not expected to exceed 10% of the total income of the business for the year of assessment? |
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| 12 |
Do you declare that the income from the disposal of assets by the business over the year of assessment and the past two years of assessment is not expected to exceed R1.5 million in total? |
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Note: If you are a partner in more than one partnership, you will not qualify for Turnover Tax. Your partners will still qualify if they are only partners in a single partnership and answer yes to all the questions.
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5. FREQUENTLY ASKED QUESTIONS ABOUT TURNOVER TAX
For a comprehensive list of questions and answers, please click here.
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6. HOW TO APPLY FOR TURNOVER TAX?
You may apply for Turnover Tax by completing the necessary form, click here to download the Application Form and Guide to complete Turnover Tax application form. After completion, you need to take it to your nearest SARS branch, to locate your nearest branch, click here. Or you can post it to:
SARS Revenue Branch Office
PO Box 1003
Alberton
1450
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7. TURNOVER TAX FORMS
8. TAXPAYER EDUCATION WORKSHOPS FOR 2010
9. CONTACT US
If you have any questions regarding Turnover Tax, please contact us as follows:
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Call our SARS Contact Centre on 0800 00 7277 (0800 00 SARS)
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Email or fax one of our dedicated four contact centres:
- Northern South Africa: Taxpayers residing in Gauteng north (including Centurion and Pretoria), North West, Mpumalanga and Limpopo, please use: Contact.north@sars.gov.za and fax 0126706880
- Central South Africa: Taxpayers residing in Gauteng south (including Midrand, the Greater Johannesburg area, Kempton Park, Boksburg, Vereeniging and Springs), the Free State and Northern Cape, please use: Contact.central@sars.gov.za and fax 0102085005
- Eastern South Africa: Taxpayers residing in KZN and the northern parts of the Eastern Cape (up to and including East London) please use: Contact.east@sars.gov.za and fax 0313286018
- Southern South Africa: Taxpayers residing in the Eastern Cape south of East London and the Western Cape please use: Contact.south@sars.gov.za and fax 0214138905
- Or visit your nearest SARS Branch.
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