See Turnover Tax as a Gift for your Micro Business Print

April 2009

The simplified tax system for turnover tax was introduced by SARS in order to relieve the burden of tax returns for qualifying micro businesses. This initiative is to encourage entrepreneurship and create an enabling environment for the growth and survival of micro businesses. The Revenue Laws Amendment Act, 2008, was promulgated on January 8, 2009 and The National Treasury and SARS announced that it would come into operation with effect from 1 March 2009. This article will discuss this new tax system in order to give micro businesses whose annual turnover is no more than R1 million, a better understanding of what it entails and who will be involved.

Turnover Tax serves as a replacement for Income Tax, Capital Gains Tax, and Secondary Tax on Companies, and an increase in the compulsory VAT registration threshold from R300 000 to R1 million and will be levied on an annual basis. Micro businesses are not obligated to switch over to Turnover Tax and can remain using the current tax system but if it elects to be so, the micro business must apply prior to the new tax year. The new Turnover Tax will be available to sole proprietors (individuals), partnerships, close corporations, co-operatives and companies.

The tax rate will be calculated on the “taxable turnover” of the business with a few specific inclusions and exclusions. Records of proof of expenses that are claimed as tax deductions to determine taxable income will no longer have to be kept and maintained. In order to take into account the expenses, the rates used in the tax table below are lower than the current tax rates.

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

Hopefully this new tax system will bring relief for micro businesses and benefit these businesses. SARS has prepared a Tax Guide for Micro businesses to assist them with understanding the simplified tax system better and to empower them to make an informed decision on registering for it. For more information visit the SARS website at www.sars.gov.za.

Should you have any questions or comments that you would like to share with us about the above article please do not hesitate to contact us on Tel: 021 888 6000 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .