BCOM: ACCOUNTING

MODULE: TAXATION 3A
 TAXATION 3A

Unit 7:
Turnover Tax
 TAXATION 3A
Unit outcomes
- Demonstrate a thorough understanding of the term micro business
- Calculate the taxable turnover of an entity
- Demonstrate a thorough understanding of the registration/
deregistration process for turnover tax (TT) and the administration
of TT
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Introduction
• Turnover tax is a simplified system of taxation that was introduced to
substitute income tax, CGT, dividends tax (partially) and VAT.
• This system of taxation applies to all businesses who qualify as a micro
business.
• This study unit is going discuss the requirements to qualify as a micro
business, the calculation of taxable turnover, turnover tax rates, the
requirements for registration and deregistration of turnover tax, and lastly,
how turnover tax is administered.
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Micro business
Any natural person, company or close corporation with qualifying turnover that
does not exceed R1 million may elect to be taxed on the turnover tax system.

However, this does not include persons specifically disqualified to register as a

micro business.
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Qualifying turnover
This refers to receipts of a business during a year of assessment from carrying on trade.
The receipts exclude the following amounts:

• Receipts of capital nature;

• Certain Government grants; and

• Amounts received from small business funding entities.

If a taxpayer carried on trade for a period less than 12 months, the threshold of
R1 million is proportioned according to the number of full months the taxpayer
carried on a trade.
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Persons specifically excluded and disqualified as micro businesses
The following is a list of persons specifically excluded and disqualified to be micro business:

• A person who, at any time during the year of assessment, holds shares or interests in a private
company, close corporation or co-operative

• A person for whom more than 20% of total receipts consists of investment income and
professional income

• A person who is a personal service provider or labour broker

• A person receiving capital receipts in excess of R1,5 million over three years

• Certain persons in partnerships

• Certain companies, close corporations and co-operatives.

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Calculating taxable turnover
The taxable turnover consist of:

• Cash receipts (paragraph 5):

• Not of a capital nature;

• Received by a registered micro business; and

• From business activities carried on in the Republic

• 50% of receipts of a capital nature from the disposal of (paragraph 6):

• Immovable property used mainly for business purposes; and

• Any other asset, other than financial instruments, used for business purposes

• 100% of investment income (excluding local and foreign dividends), if micro business is a company, close corporation or
co-operative (paragraph 6).
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Registration
“Registration is voluntary, and even if the person’s qualifying turnover is below the R1 million
threshold, he still has to apply for registration” .

The application for registration of a micro business must be done within 2 months from
the date of commencement if the business started operating during the current year of
assessment.

If the business is already in operation, the registration can be done before the beginning of the
next year of assessment.
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Deregistration
Deregistration of a registered micro business can either be compulsory or voluntary. A micro business may
elect to deregister voluntary only after three years after it’s been in the turnover tax system. This type of
deregistration will only be effective at the beginning of the year assessment, for example, if the business
deregisters on 28 January 2018, this will only be effective from 1 March 2018.

Therefore, voluntary deregistration must be made before the beginning of the year assessment for which
deregistration is required. If the Commissioner allows, deregistration may be done during the year of
assessment for which deregistration is required.

Compulsory deregistration occurs when a business is no longer qualified as micro business. A registered
micro business must notify the Commissioner within 21 days from the date:

• the qualifying turnover exceeds R1 million; or

• when it reasonably expected that the qualifying turnover might exceed R1 million.

Compulsory deregistration is effective at the beginning of the following month from the month the
qualifying turnover exceeds R1 million or when it determined that there are reasonable grounds to
believe that the qualifying turnover is going to exceed R1 million.
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Administration of turnover tax
Micro businesses are not required to make provisional tax payments. However, they are
requirement to make two interim payments and one final payment on assessment, where
necessary.

• The first interim payment must be submitted to SARS on or before 31 August (six
months from the beginning of the year of assessment).

• The second interim payment must be submitted on or before 28/29 February (at the end of
the year of assessment).
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Summary
This study unit provides an explanation of turnover tax. It looks at the
requirements for registering and deregistering as a micro business as well as
the difference in the rate of tax that is payable if a company qualifies as a
micro business.

This brings us to the end of the course/module on Taxation 3A!

Well done and all the best for your OSA (Exams)!!