Turnover tax simplifies tax for small businesses

2011-03-17 00:00

IN the past if you ran a small business, irrespective of the size, it was your responsibility by law to register for income tax.

SARS understands that small businesses should not be required to have the same tax compliance burden as big businesses. Having recognised this, SARS implemented a simplified tax system for small businesses with effect from March 1, 2009.

This simplified tax system consists of a turnover tax and an increase in the compulsory VAT registration threshold from R300 000 to R1 million. This effectively means that qualifying businesses with a turnover of up to R1 million per annum are not forced to register for VAT and can choose to register for the simpler “turnover tax”. A business registered for turnover tax is only required to submit one “easy tax return”.

Under current conditions a small business is not allowed to register for both VAT and turnover tax. This is mainly aimed at assisting small informal businesses. It was previously required to deregister a VAT vendor in order for them to register for turnover tax. Businesses that qualify for the turnover tax that are already registered are required to deregister as a VAT vendor before registering for turnover tax.

The rule is that when any vendor deregisters from the VAT system, they are required to pay VAT (exit VAT) on the lesser amount of the cost or market value of the assets held before deregistering.

Vendors that deregister from the VAT system, following the increase in the VAT registration threshold to R1 million, will be allowed to pay the exit VAT over a period of six months.

Turnover tax is available to individuals (sole proprietors), partnerships, close corporations, companies and co-operatives and is an elective process i.e. qualifying small businesses can choose to register for the standard tax system or for turnover tax.

SARS has approved an extension until April 30, 2011, for existing small businesses to register for turnover tax for the 2011/12 tax year.

Turnover tax rates will be lowered from March 1, 2011, so that micro businesses only become liable to pay the tax if the annual turnover exceeds R150 000 (previously R100 000).

This means that the first R150 000 (previously R100 000) of taxable turnover of all businesses registered for turnover tax will be free of tax!

For more information call KPMG at 033 347 7600.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.