Reading Time: 2 minutes
Turnover Tax allows for South African small businesses to reduce their income tax rate from 28% to 0%. Taxation is instead levied on Turnover (net of VAT), calculated according to a sliding scale, as follows:
| Taxable turnover (ZAR) | Rate of tax (ZAR) |
| 1 – 335 000 | 0% of turnover |
| 335 001 – 500 000 | 1% of turnover above 335 000 |
|
501 000 – 750 000 |
1,650 + 2% of turnover above 500,000 |
| 750 001 – 1 000 000 | 6 650 + 3% of turnover above 750 000 |
The Turnover Tax replaces all other forms of corporate tax, including income tax, VAT, provisional tax, capital gains tax and dividends tax. Micro businesses registered for turnover tax have the option to elect to remain within the VAT system.
In order to qualify for turnover tax, a business has to meet the criteria set out by SARS and fall into one of the following categories:
- Individuals (sole proprietors)
- Partnerships
- Close corporations
- Companies
- Cooperatives
The fine print:
- Public benefit organizations, recreational clubs, associations of persons and small business funders are excluded from qualification.
- Income from professional services rendered is limited to 20% of total income.
- Professional services are defined as: accounting, actuarial science, architecture, auctioneers, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial services brokers, health, IT, journalism, law, management, estate agencies or agents, research, sport surveying, translation, valuation and veterinary science.
Registration for turnover tax is not yet available within SARS eFiling and must be performed manually.
If your business has a turnover of R1m or less and meets the requirements explained above, you may be a candidate for turnover tax. Contact the MMS taxation services team for advice on qualification and how to implement this for your business.