SARS introduced Turnover Tax for micro enterprises, to reduce the burden and make it easier for micro businesses to meet their tax obligations. They have combined Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax into one Turnover Tax. Micro businesses therefore have an option whether to pay using the normal income tax system, or using the Turnover Tax system
Micro enterprises who have an annual turnover of under R 1 000 000, and are either sole proprietors, partnerships, close corporations, companies or Co-operatives. One of the benefits of registering with turnover tax is the reduced requirement for record-keeping, as the following documents must be maintained:
- Records of all amounts received
- Records of all dividends declared and received
- A list of all assets and liabilities with a cost price exceeding R10 000.
What are the other benefits?
Turnover tax is calculated on a sliding scale, rather than the flat-rate Companies Tax of 28%, as seen on the table below
|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|
To illustrate the potential savings in tax payable to SARS, if a company made a taxable income of R 700 000 in its financial year, the tax payable would be R 196 000. However, if the company made a taxable turnover of R700 000 in its financial year, the tax payable would be R 5 650.
Tinyeleti Consulting is a consulting company that specialises in the SMME market, by providing expert advice to assist SMMEs and providing accounting services, which includes guidance in Turnover Tax and other tax related issues, and will enable you to operate more efficiently. Email us at firstname.lastname@example.org or call us at 011 568 2371 to find out more.