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South Africa Launches Simplified Tax System For Micro Businesses,
by Robert Lee, Tax-News.com, London
Tuesday, March 10, 2009
The South African Revenue Service (SARS) has announced that businesses have
until April 30 to submit applications to register for the turnover tax system,
an optional parallel tax regime which is intended to dramatically simplify tax
compliance for small firms.
Under the turnover tax system, which went into effect on March 1, 2009, qualifying
small businesses will only need to submit two interim returns and a final return
for assessment. This should translate into a substantial saving in time and
costs relating to the current provisional tax, income tax and VAT system which
requires businesses to submit an average of 10 returns a year.
According to independent research commissioned by SARS and the South African Treasury,
it costs small businesses an average of about ZAR7,000 (USD665) per year to
ensure that tax returns are prepared, completed and submitted as required.
Unlike the income tax system, which makes use of comprehensive inclusion rules
and a reduction process that requires proof of expenses to be maintained, the
turnover tax is calculated by applying a low set of tax rates to the
turnover of the business. The turnover tax will be payable annually on assessment
with two six-monthly interim payments. Capital gains will be taxed by simply
including 50% of the amounts received from the disposal of business assets in
the turnover to be taxed.
Companies can voluntarily opt-in to the turnover tax system, which is available
to the following forms of businesses: sole proprietors, partnerships, close
corporations, cooperatives and companies provided they have a taxable turnover
of ZAR1m or less in a year of assessment and meet certain criteria. It is not
available to labour brokers, personal service providers or persons that render
professional services. Public benefit organisations and recreational clubs also
do not qualify, since they already enjoy specific concessions.
Small businesses already registered for VAT that opt to register for the turnover
tax will automatically be deregistered from the VAT system if their applications
for the turnover tax are successful.
Applications to register for the turnover tax system in the current 2009/10
tax year close on April 30, 2009. Thereafter applicants will only be able to
register for the turnover tax for the next tax year to avoid the administrative
challenge for businesses and SARS of running multiple tax systems in a year
simultaneously. Start-up businesses can also apply to register within two months
of their establishment.
The turnover tax will be charged at the following rates:
ZAR0 to ZAR100,000: 0%;
ZAR100,001 to ZAR300,000: 1%;
ZAR300,001 to ZAR500,000: ZAR2,000 plus 3% of the amount above ZAR300,000;
ZAR500,001 to ZAR750,000: ZARR8,000 plus 5% of the amount above ZAR500,000
ZAR750,001 and above: ZAR20,500 plus 7% of the amount above ZAR750,000.
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