Over the next few blog articles, we will be shedding light on various types of tax including some of the lesser known forms that apply within South Africa. Today, we will be focusing on Turnover Tax and will explain who it is for, how it works, and the advantages of using Turnover Tax.
What is Turnover Tax?
Turnover Tax is a tax system offering micro businesses a simple tax system free of the administrative complexities and costs associated with the standard tax system. It is ideal for small businesses that sell products.
How does Turnover Tax work?
As the name suggests, turnover is the amount of money taken (or turned over) by a business in a particular period. Turnover tax is calculated by applying a tax rate to this turnover amount. By using the table below, you can see the rates that would be applicable depending on your turnover. These rates apply to any year (12 months) of assessment ending on the last day of February.
|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|
Who is eligible to make use of Turnover Tax?
If your business has a turnover of less than or equal to R1 million, you may be eligible to utilize the Turnover Tax system. There are however a number of other factors that would affect eligibility, including:
- Whether your business is a ‘personal service provider’
- If your business is a partnership, close corporation, co-operative or company, whether all partners remain individuals for the year of assessment
- Whether your business has been previously registered for Turnover Tax
- Whether your business is a recreational club, public benefit organisation, small business funding entity or an association of persons
What are the advantages of Turnover Tax?
- Easier for small businesses to meet their tax obligations
- Reduces the administrative complexities and cost associated with the standard tax system
- Far fewer administrative tasks are necessary
- Offers more favorable tax rates for eligible businesses
This article should have provided you with a brief overview of Turnover Tax and how it would benefit your business if you are eligible. If you would like to find out more about Turnover Tax and whether your small business would qualify, contact Dirmeik Consulting today.
Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881