
There's a video on Tik Tok by a group of Xhosa ladies who love to banter, especially with those who don't speak isiXhosa. In this video, they used a washing dish filled with water to explain taxes. One lady played the taxman, and the other was the taxpayer. The water in the dish represented income.
Whenever the taxpayer took a few liters of water, the taxman would swoop in with a bigger container. He would take double or more of what the taxpayer spent. It was funny and smart. But, it showed a belief: the taxman takes too much of our earnings.
So, is that how SARS operates? Not exactly.
This brings us to the topic of turnover tax. Let me break it down in a way that's as simple and engaging as the video. First, running a small business in South Africa can be tough, especially when it comes to taxes. But don't worry! SARS designed turnover tax to make things easier for you.
What is turnover tax?
Turnover Tax is a simplified tax system for small businesses in South Africa. It's meant for businesses with a yearly turnover (total income) of R1 million or less. You pay a single tax on your turnover. It's simpler than dealing with complex tax calculations and many returns.
Who qualifies for Turnover Tax?
If your business has a turnover of R1 million or less in a year, you're eligible. This includes:
- Sole proprietors
- Partnerships
- Close corporations
- Companies
- Co-operatives
Some businesses can't use Turnover Tax. This includes personal service providers and certain professionals, like consultants and accountants.
How is turnover tax calculated?
You calculate Turnover Tax as a percentage of your turnover. And the rates tier as your turnover increases. Here’s a table to give you an idea:
0 - R335,000: 0%
R335,001 - R500,000: 1% of each rand above R335,000
R500,001 - R750,000: R1,650 + 2% of each rand above R500,000
R750,001 and above: R6,650 + 3% of each rand above R750,000
Benefits of Turnover Tax
Simplicity: One tax, one return. No need to worry about VAT, provisional tax, income tax, or capital gains tax.
Cash Flow: Turnover Tax can improve your cash flow since you pay tax based on income received, not on profits.
How to Register
Registering for Turnover Tax is easy. You can do it online via the SARS eFiling system or visit a SARS branch. Remember, you must register before the start of the tax year (March 1st).
Record-Keeping
Even though Turnover Tax simplifies things, you still need to keep good records. Keep track of all your income and expenses. This helps ensure your tax return is accurate and can protect you if SARS has any questions.
Is Turnover Tax Right for You?
Turnover Tax is great for many small businesses, but it’s not for everyone. Consider your business type, turnover, and growth plans. Sometimes, standard tax systems might be better. This is true if your expenses are high.
Conclusion
Turnover Tax can simplify your life and help you focus more on growing your business. If your turnover is under R1 million, it’s worth considering. Always check with a tax professional to make sure it's the best option for you. Happy running your business!
If you have any questions or need more details, visit the SARS website or talk to a tax consultant.