small businesses with launch of Turnover Tax
4 March 2009
In an effort to cut red tape and reduce the administrative burden on small
businesses, the South African Revenue Service has launched an exciting new tax
system which will dramatically lower the time and cost of submitting tax
returns.
This initiative is in line with government's broader mandate to encourage
entrepreneurship and create an enabling environment for small businesses to
survive and grow.
Known as Turnover Tax, the innovative tax system is available to small
businesses with a turnover up to R1 million a year and replaces income tax,
provisional tax, capital gains tax, secondary tax on companies and Value Added
Tax (VAT).
Turnover Tax is part of the introduction of a simplified tax system to
reduce the tax compliance burden on small businesses which was announced in the
2008 Budget by the Minister of Finance. Its introduction this week coincides an
increase in the compulsory VAT registration threshold from R300 000 to R1
million.
Under the Turnover Tax system, qualifying small businesses will only need to
submit two interim returns and a final return for assessment. This represents a
huge saving in time and costs relating to the current provisional tax, income
tax and VAT system which requires businesses to submit an average of 10 returns
a year.
According to independent research commissioned by SARS and National
Treasury, it costs small businesses an average of about R7 000 a year to ensure
that tax returns for income tax, provisional tax, VAT and employees' tax are
prepared, completed and submitted as required.
The Turnover Tax is calculated by simply applying the relevant tax rate to
the annual taxable turnover of the small business as per the following
table:
Turnover: R0 to R100 000
Marginal Rates (R): 0 percent
Turnover: R100 001 to R300 000
Marginal Rates (R): one percent of each R1 above R100 000
Turnover: R300 001 to R500 000
Marginal Rates (R): R2 000 + three percent of the amount above R300 000
Turnover: R500 001 to R750 000
Marginal Rates (R): R8 000 + five percent of the amount above R500 000
Turnover: R750 001 and above
Marginal Rates (R): R20 500 + seven percent of the amount above R750 000
The Turnover Tax is available to the following forms of businesses: sole
proprietors, partnerships, close corporations, co-operatives and companies
provided they have a taxable turnover of R1 million or less in a year of
assessment and meet certain criteria. It is not available to labour brokers,
personal service providers or persons that render professional services. Public
benefit organisations and recreational clubs also do not qualify, since they
already enjoy specific concessions.
Small businesses already registered for VAT that opt to register for the
Turnover Tax will automatically be deregistered from the VAT system if their
application for the Turnover Tax is successful.
The Turnover Tax is voluntary so qualifying small businesses can choose
whether to register for it or not, depending on their individual
circumstances.
Applications to register for the Turnover Tax system in the current 2009/10
tax year close on 30 April 2009. Thereafter applicants will only be able to
register for the Turnover Tax for the next tax year to avoid the administrative
challenge for businesses and SARS of running multiple tax systems in a year
simultaneously. Start-up businesses can also apply to register within two
months of their establishment. For more information, please see our Turnover
Tax webpage at http://www.sars.gov.za/home.asp?pid=43122.
For further media enquiries please contact:
Adrian Lackay
Tel: 012 422 4206
Cell: 083 388 2580
Issued by: South African Revenue Service
4 March 2009
Source: South African Revenue Service (http://www.sars.gov.za)
