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Home > NEWS > Should you TURNOVER to a new tax system?

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Should you TURNOVER to a new tax system?

They say Taxation is the gentle art of plucking the goose in such a way as to secure the greatest amount of feathers with the least amount of squawking!

On March, 01 2009 SARS introduced the Turnover based tax for micro businesses. This is an all encompassing tax which replaces five other tax types namely: VAT, Income Tax, Capital Gains Tax, STC and Provisional Tax. The tax system has been designed with the stated objective to simplify and reduce the administrative burden and costs on micro businesses in order to streamline their tax obligations.

Turnover tax is a tax alternative that may be elected and is calculated by applying a sliding tax rate (refer Table 1) on the Taxable Turnover of the micro business. It is available to sole proprietors, partnerships, close corporations, companies and co-operatives.

The rates for the 2009/2010 year of assessment are as follows:

Tax Table

Qualifying Criteria

In order to determine if your business qualifies for the turnover tax for a year of assessment, answer the following 12 questions as put forward by SARS. If the answer to any one of these questions is “NO”, your business will not qualify for turnover tax for that year of assessment.

Tax Table 2

Although there are certain positives to be taken into account such as the reduced administrative costs and requirements, tax experts are quick to point out that Turnover tax may not necessarily favour all micro businesses. It is more likely to attract those micro businesses that have a much higher gross profit margin. Entrepreneurs are encouraged to consult their trusted tax advisors and carefully analyse their tax expense before being swayed.

Should you wish to find out more about Turnover Tax you can do the following:

Contact your Tax Advisor / Practioner
Visit the SARS website at www.sars.gov.za
Alternatively contact SARS on 0800 00 7277

The deadline for registering existing businesses for Turnover Tax will be the last day of February of each year whilst new businesses must register within two months from commencing business activities.