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Turnover tax regime: the ins and outs

19 April 2016   (0 Comments)
Posted by: Author: Amanda Visser
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Author: Amanda Visser (Moneyweb)

Implications not well understood.

The turnover tax regime, designed mainly for "survivalist or micro businesses”, has been criticised for the fact that these start-ups are paying tax, even though they are making losses.

Commentators say if they remained in the normal tax regime they would have paid no tax and they would be able to carry the losses forward to offset against future profits or income.

The turnover tax regime is available for micro businesses with a qualifying turnover of R1 million or less. The system provides for a single tax in the place of normal (income and corporate) tax, capital gains tax (CGT) and dividends tax.

Tax rates for qualifying micro businesses range between 1% of the amount above R150,000 up to R300,000 and R15,500 plus 6% of the amount above R750,000.

Liandor Financial Accountants Director Rodney Smith says they have seen instances where unincorporated persons (the owner carries all the risks and liabilities) are paying turnover tax for a few years before it is forced to close because of losses.

"Under the turnover tax regime the accumulated losses are lost forever. In the normal tax regime the unincorporated individual would have closed the business with personal accumulated tax losses to be utilised going forward,” he says.

In some instances the turnover may be relatively high, but the cash available to the owner is low. This could be due to a variety of reasons such as high rentals, high overheads, or high labour costs.

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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