Turnover Tax – the cheaper option for Micro Businesses
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 2018:
Tax rates: 2018
| Turnover | Marginal Rates (R) |
| R0 – R335 000 | 0% |
| R335 001 – R500 000 | 1% of each R1 above R500 000 |
| R500 001 – R750 000 | R1 650 + 2% of the amount above R500 000 |
| R750 001 and above | R6 650 + 3% of the amount above R750 000 |
Table 1: Turnover Tax Rates for any year of assessment ending during the period of 12 months ending on 28 February 2018.
Who is it for?
Micro businesses with an annual turnover of R 1 million or less. The following taxpayers may qualify:
- Individuals (sole proprietors)
- Partnerships
- Close corporations
- Companies
- Co-operatives
How to pay?
There are three payment dates:
- 1st payment is in the middle of the tax year on the last business day of August
- 2nd payment is at the end of the tax year on the last business day of February
- 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:
- Records of all amounts received;
- Records of dividends declared;
- A list of each asset with a cost price of more than R10,000 at the end of the year of assessment as well as of liabilities exceeding R10,000.
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.
FinSolve, March 14th, 2016
