1.11 Turnover Tax
Turnover Tax
Turnover tax is a simplified system aimed at making it easier for micro business to meet their tax obligations.
How is Turnover Tax calculated?
Turnover tax is worked out by applying a tax rate to the taxable turnover of a micro business. Year of assessment ending on any date between 1 March 2021 and 28 February 2022:
Any person that carries on an enterprise, as defined in section 1(1) of the VAT Act, may qualify to register for VAT. A person is a defined term and includes a company, individual, partnership, trust fund, and a municipality.
It is compulsory for a person to register for VAT if the value of taxable supplies made or to be made, is in excess of R1 million in any consecutive twelve month period.
A person may also choose to register voluntarily if the value of taxable supplies made, or to be made, is not in excess of R1 million in any consecutive twelve month period.
Who is it for?
Micro businesses with an annual turnover of R 1 million or less. The following taxpayers may qualify:
- Individuals (sole proprietors)
- Partnerships Companies
- Co-operatives
What records schould be kept?
A big advantage of turnover tax is the reduced record-keeping requirements. The following records must be kept:
- 1. Records of all amounts received;
- 2. Records of dividends declared;
- 3. A list of each asset with a cost price of more than R10,000 at the end of the year of assessment as well as of liabilities exceeding R10,000.
- To take account of the typical expenses incurred by a micro business and to eliminate the need for detailed recordkeeping of deductible tax expenses, the turnover tax rates are significantly lower than the tax rates under the standard tax system.
Tasks
Watch the following video to gain more insight into turnover tax: