Turnover Tax lets small businesses in South Africa reduce their company tax from the 28% rate that SARS levies on profits to as little as 0%.
A variety of businesses with an annual turnover of less than R1 million qualify for Turnover Tax.
Turnover Tax is intended to replace all other forms of corporate tax, including Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax.
However, businesses can opt to continue functioning under VAT obligations if they prefer.
Besides requiring an income of below R1 million per annum, a business needs to be one of the following types to qualify for Turnover Tax:
- Individuals (sole proprietors)
- Close corporations
There are a few other criteria, and SARS has a checklist for businesses to see if they qualify.
Excluded from Turnover Tax are public benefit organisations, recreational clubs, an association of persons or small business funding entities.
Additionally, the income generated by providing professional services may not exceed 20% of total income.
Professional services consist of: accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport surveying, translation, valuation, and veterinary science.
Turnover Tax rates vary from 0% for businesses with up to R335,000 annual income, to 3% for businesses with an income between R750,001 and R999,999.
In total there are four tax brackets, as summarised in the table below.
|Turnover Tax brackets|
|Qualifying turnover||Tax paid|
|R0 – R335,000||0%|
|R335,001 – R500,000||1% of each R1 above R335,000|
|R500,001 – R750,000||R1,650 + 2% of the amount above R500,000|
|R750 001 – R999,999||R6,650 + 3% of the amount above R750,000|
Registration for Turnover Tax
Turnover Tax has not yet been implemented into the SARS eFiling system, so registration must be done manually.
After making an online booking, you will be sent an SMS confirming your booking and your reference number.
On the appointment date, a SARS agent will call you and give you a case number and assist you in submitting your TT01 form.
After the form has been processed, Turnover Tax will be added to your available Tax Types on the eFiling portal, as shown in the screenshot below. After selecting it, your business will be a recognised microbusiness liable to pay Turnover Tax.
This article was previously published on MyBroadband