54601_FAQsforMicroBusinesses20100115Final

8/4/2019 54601_FAQsforMicroBusinesses20100115Final

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THE SIMPLIFIED TAX SYSTEM FOR

MICRO BUSINESSES:

Frequently Asked Questions

(The answers to these questions are meant to be used as a simple guide.They are not meant to go into the precise technical and legal detail that isoften associated with taxation. They should, therefore, not be used as legalreferences and are not binding rulings.)


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TABLE OF QUESTIONS

ITEM PAGE

1 What is a micro businesses? 32 What does the simplified tax system for micro businesses consist of? 3

3 What is a turnover tax? 34 What is the main objective of the simplified tax system for micro businesses? 3

5 How will the simplified tax system work for the very simple, straight-forward micro business? 3

6 When will this system come into operation? 47 Will a micro business be forced to register for the turnover tax? 4

8 Will a micro business be able to register for the turnover tax and for VAT voluntarily? 4

9 When should a business deregister from VAT to register for the turnover tax? 410 If a micro business chooses to deregister from the VAT system, will there be an exit charge

and, if so, will it be payable immediately?5

11 Is there any further relief in relation to the VAT exit charge? 512 Is the deduction in question 11 a once-off relief or will the relief be recoverable? 5

13 What are requirements for a business to make use of the turnover tax? 5

14 What happens if a micro business in the simplified tax system fails to meet any one of therequirements during the year of assessment e.g. its qualifying turnover exceeds or is likely toexceed R1 million for the year of assessment?

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15 What does an existing registered small business do if it wants to change to the simplified taxsystem after meeting with all of the requirements?

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16 What must a micro business do if it commences trading after the beginning of a year ofassessment?

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17 How do you calculate the turnover tax that will be payable? 918 What is taxable turnover? 9

19 Is there a minimum amount/threshold below which micro businesses will not be liable for theturnover tax?

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20 Will I still need to register my business for the turnover tax if my taxable turnover is below theexempt threshold?

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21 How will the returns and payments work? 11

22 Where can the tax returns be obtained from? 1223 Surely a micro business must keep some form of records in the turnover tax system. What

are these?12

24 How will a person be taxed if he or she is in a partnership with family members or anyoneelse?

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25 Will a person also be penalised if one of his/her partners is a partner in another partnership? 13

26 Will all dividend distributions by companies, close corporations, and cooperatives be tax-free,even after the new dividend withholding tax replaces secondary tax on companies (STC)?

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27 Will a micro business pay less tax in the turnover tax system than in the current tax system? 14

28 How does a business decide on whether or not to use the simplified tax system? 14

29 How will income from other sources be taxed? 1530 Will the salaries paid by the micro business to its owners be subject to tax in their hands? 15

31 Is there a simplified dispensation for employees/payroll taxes? 15

32 What happens if a micro business is in the simplified tax system and decides to deregister asit no longer sees it as being beneficial?

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Annexure: Quick Test to see if a business qualifies for the turnover tax


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1. What is a micro business?

A micro business is basically a business with a turnover that does not exceedR1 million per annum.

2. What does the simplified tax system for micro businesses consist of?

The simplified tax system consists of:

a turnover tax as substitute for income tax, capital gains tax, andsecondary tax on companies, and

an increase in the compulsory VAT registration threshold fromR300,000 to R1 million, which means that business with a turnover thatdoes not exceed R1 million per annum will not be forced to register forVAT.

3. What is a turnover tax?

A turnover tax is a form of presumptive tax, which calculates the tax liability ofa taxpayer based on certain assumptions. Presumptive taxes are used mainlyin developing countries where formalisation and accurate record-keeping aredifficult for a large portion of the businesses. Therefore, by its very nature, apresumptive tax compromises accuracy for simplicity to achieve a level oftaxation that is very similar to what would be payable in a typical tax system.The turnover tax used in South Africa is calculated by applying a tax rate tothe turnover of a business.

4. What is the main objective of the simplified tax system for microbusinesses?

To reduce the tax compliance burden and related costs for micro businesses.

A typical business may be liable for the following to SARS:

1. Value-Added Tax (VAT)2. Income Tax;3. Capital Gains Tax (CGT);4. Secondary Tax on Companies (STC);

The simplified tax system aims to reduce this compliance burden byincreasing the compulsory VAT registration threshold from R300,000 toR1 million (dont have to register if turnover over a 12-month period is lessthan the threshold) and replacing the balance of the tax products with a simpleturnover tax for micro businesses that meet the qualifying criteria (explained inmore detail later in question 13).


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5. How will the simplified tax system work for the very simple, straight-forward micro business?

A business with a turnover that does not exceed R1 million per annum will nothave to register for VAT. The turnover tax will be determined by simply

applying the relevant tax rate to the turnover of the business. It is far lessburdensome than the income tax system in that records will not have to bekept as proof of expenses that are claimed as tax deductions to determinetaxable income, which can be very technical and involved. In order to takeinto account the expenses that will no longer be allowed as deductions, therates used to calculate the turnover tax payable in the tax table (seeQuestion 17) are far lower than the current tax rates for individuals andcompanies.

6. When will this system come into operation?

The turnover tax will come into operation with effect from 1 March 2009. Thecompulsory VAT registration threshold will also be increased from R300,000 toR1 million with effect from this date.

7. Will a micro business be forced to register for the turnover tax?

Micro businesses will not be forced to register for the turnover tax. They canchoose to be within the current tax system or to register for the turnover tax.If they wish to register for the turnover tax, they must register to do so beforethe start of the next tax year of assessment i.e. by 1 March.

8. Will a micro business be able to register for the turnover tax and for VATvoluntarily?

No. The main objective of the simplified tax system for micro businesses is toreduce their compliance burden. The VAT system requires a high standard ofrecord-keeping and thus a micro business that is registered for VAT should bein a position to comply with normal income tax requirements. A micro

business that is registered for the turnover tax will, therefore, not be permittedto register for VAT.

9. When should a business deregister from VAT to register for the turnovertax?

Since a business must register for the turnover tax before the beginning of ayear of assessment, i.e. before 1 March, it must commence its VAT de-registration process in good time to make the deadline.


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10. If a micro business chooses to deregister from the VAT system, willthere be an exit charge and, if so, will it be payable immediately?

The usual rule is that when any vendor deregisters from the VAT system, it isrequired to pay output VAT (exit VAT) on the value of the assets held before

deregistering.

Vendors that apply for deregistration from the VAT system in order to registerfor the turnover tax will be allowed to pay the exit VAT over a period of sixmonths.

11. Is there any further relief in relation to the VAT exit charge?

Where a vendor deregisters from the VAT system in order to register for theturnover tax, further relief will be granted to that vendor by way of a deduction

of up to R100,000 of the value of the assets held by that vendor prior to suchderegistration. This equates to an approximate reduction of up to R12,281 inthe exit VAT that will be payable.

12. Is the deduction in question 11 a once-off relief or will the relief berecoverable?

If a person received the deduction mentioned in question 11 and subsequentlyre-registers for VAT, the deduction that the vendor can claim on the value ofassets upon re-entering the VAT system will be reduced by up to R100,000.

13. What are the requirements for a business to make use of the turnovertax?

a. The business must not trade in a form other than a sole proprietor(individual), partnership, close corporation, company or cooperative.

b. The qualifying turnover (income) of the business must not exceedR1 million per annum or must not be expected to do so. Receipts of a

capital nature and certain Government grants that are exempt from incometax (as per section 10 of the Income Tax Act) will not be taken into accountin determining this cap. Where a micro business is only registered for apart of the year of assessment, the cap will be determined pro rataaccording to the number of months it was registered.

As an anti-avoidance measure, the turnover of a connected personsbusiness (e.g. business of husband, wife or child) that is considered to bepart of the main micro business will be added to the turnover of the mainmicro business to determine if it exceeds the R1 million cap. This willhappen if SARS is not satisfied that each of the businesses is independent

of each other, and that the splitting was done mainly to take advantage ofthe turnover tax.


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c. The business must not be registered for VAT.

d. The business must not render a professional service. The following areregarded as professional services: accounting; actuarial science;

architecture; auctioneering; auditing; broadcasting; broking; commercialarts; consulting; draftsmanship; education; engineering; entertainment;health; information technology; journalism; law; management; performingarts; real estate; research; secretarial services; sports; surveying;translation; valuation; or veterinary science..

e. The business must not be a personal service provider or a labour brokerwithout a SARS exemption certificate.

A personal service provider1 is a company or trust that has its servicesrendered to clients by a connected person (usually the owner, relative,

or beneficiary) and

the connected person would be usually regarded as an employeeof the client ; or

where the services must be performed mainly at the premises ofthe client, the connected person is controlled or supervised by theclient as to the manner in which the services are rendered; or

where more than 80 per cent of the income of the company or trustis received from any one client during the year of assessment

except where the company or trust, throughout the year of assessment,employs three or more full-time employees who are, on a full-timebasis, engaged in the business of the company or trust and are notconnected persons.

A labour broker2 is any individual who, for reward, provides a clientwith other persons to render a service and pays the other persons forrendering the service. A person who pays a labour broker for servicesreceived must withhold employees tax (PAYE) from the payment andpay it over to SARS on behalf of the labour broker unless the labourbroker is able to produce a valid tax exemption certificate from SARS.

f. In the case of a person who is a partner in partnership, that person mustnot be a partner in another business partnership (see Question 25). Itmust be noted that only this partner will not qualify for the turnover tax.The other partners in the partnership could still qualify for the turnover taxprovided that they are not partners in another partnership and that theymeet all other requirements.

g. If the business is a partnership, all the partners must be individuals.

1

For full definition, refer to paragraph 1 of the Fourth Schedule to the Income Tax Act, as amended by theRevenue Laws Amendment Act, 2008.2 For full definition, refer to paragraph 1 of the Fourth Schedule to the Income Tax Act.


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h. If the business is a close corporation, company, or cooperative, all of theshareholders/members must be individuals throughout the year ofassessment.

i. The business must not be a public benefit organisation or a recreational

club.

j. The year of assessment of the business must run from the beginning ofMarch to the end of February of the following year.

k. The owner and the business must not hold shares/interests in anotherclose corporation, company, or cooperative except:

in listed South African companies;

in collective investment schemes (unit trusts);

in body corporates and share block companies;

in venture capital companies;

of less than 5% in social or consumer co-operatives;

of less than 5% in co-operative burial societies or primary savings co-operative banks;

in friendly societies; and

in any company that did not trade in any year of assessment, andwhich did not own assets with a total market value that exceedsR5,000 during any year of assessment.

l. The business investment income (dividends, interest, royalties, annuities,

and rental income from fixed property) must not exceed 10% of the totalreceipts (income) of the business.

m. The receipts of the business from the disposal of capital items (assets) thatare used mainly for business purposes must not exceed a cumulativeamount of R1,5 million over a three a year period that covers the year ofassessment and the two years of assessment immediately preceding it.Mainly means more than fifty per cent of the time. If only a portion of afixed property (land and buildings) was used for business purposes, theamount must be determined on a pro rata basis.

n. The business must not have been registered for the turnover tax for thelast three years of assessment.

A Quick check to see if your business qualifies for the turnover tax for a year of

assessment is found in Annexure A.

14. What happens if a micro business in the simplified tax system fails tomeet any one of the requirements during the year of assessment e.g. itsqualifying turnover exceeds or is likely to exceed R1 million for the year

of assessment?


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A business must inform SARS within 21 days from the date on which it fails tomeet any of the requirements to be registered for the turnover tax. Based onthe information received, SARS will deregister the business from the turnovertax system. At the same time, SARS will register the business in the normalincome tax system and, where applicable, the VAT system, with effect from

the beginning of the month following the month in which the business failed tomeet any requirement. This means that the business will have to startkeeping detailed records from that point onwards. The business will beassessed differently for two periods in the year of assessment - the first periodwill fall under the turnover tax system while the second period will fall in thecurrent income system. This will be done on a pro rata basis depending onthe number of months in each system.

The business will not be allowed to re-enter the turnover tax system for threeyears.

15. What does an existing registered small business do if it wants to changeto the simplified tax system after meeting with all of the requirements?

Existing businesses that choose to register for the turnover tax mustderegister from the current income tax system with effect from 28 February.They must ensure that the necessary returns are submitted and that thepayments are made by the relevant due dates.

If they are registered for VAT, they will also have to apply for de-registration asbusinesses will not be allowed to be register for VAT if they are registered forthe turnover tax. This deregistration must be done within a suitable time frameto take into account the requirement that registration for the turnover tax musttake place before the beginning of a year of assessment i.e. before 1 March.

After deregistering from income tax and/or VAT, a business must register forthe turnover tax before the beginning of March or a later date that SARS mayset for a year of assessment.

De-registration from VATWhen any vendor deregisters from the VAT system, it is required to pay output

VAT (exit VAT) on the lesser of the cost or the market value of the assets heldbefore deregistering.

A vendor that deregisters from the VAT system in order to register for theturnover taxwill be allowed to pay the exit VAT over a period of six months.Further relief will be granted to that vendor by way of a deduction of up toR100,000 of the value of the assets held by that vendor prior to deregistration.This is an approximate reduction of up to R12,281 in the exit VAT that will bepayable.

16. What must a micro business do if it commences trading after thebeginning of a year of assessment?


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Assess the situation of the micro business to determine if it qualifies for thesimplified tax system and weigh the options (see Question 28). After decidingon which tax system to use, the micro business will have to be registered atthe nearest SARS branch office. If it chooses to register for the turnover tax, it

must do so within two months from the date of commencement of businessactivities.

17. How do you calculate the turnover tax that will be payable?

The turnover tax that is payable is determined by simply applying a specifiedtax rate to the taxable turnover of the business. The specified tax rates forthe 2009/10 year of assessment are as follows:

Turnover Tax Rates

Turnover Marginal Rates (R)

R0 - R100,000 0%

R100,001 - R300,000 1% of each R1 above R100,000

R300,001 - R500,000 R2,000 + 3% of the amount above R300,000

R500,001 - R750,000 R8,000 + 5% of the amount above R500,000

R750,001 and above R20,500 + 7% of the amount above R750,000

SARS will make electronic tax calculators available to make the calculation ofthe turnover tax even easier.

18. What is taxable turnover?

The taxable turnover is the amount, not of a capital nature, that is receivedby the business (i.e. cash basis) during a year of assessment, from businessactivities within South Africa, with specific inclusions and exclusions.

The specific inclusions are:

a. 50% of the amounts received from the disposal of immovable property(land and buildings) to the extent that the property was used for businesspurposes. This means that if only a portion of the property was used forbusiness purposes, the amount must be determined on a pro rata basis.

Example:100 square meters of a 400 square meter property (25%) are usedfor business purposes. The entire property was sold for R2 million.Accordingly only R500,000 (25% of R2 million) of the sale isattributable to the business portion. This means that only R250,000(50% of R500,000) must be included in taxable turnover.


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b. 50% of the amounts received from the disposal of a capital item (asset)that is used mainly for business purposes. Mainly implies more than 50%of the use must be for business purposes.

c. Investment income (interest, royalties, rentals and annuities), in the case of

a company, close corporation or cooperative. Dividends may be includedat a later stage when the dividend withholding tax replaces the secondarytax on companies (STC).

A micro business will be disqualified from using the turnover tax systemwhere its investment income exceeds 10% of the total receipts (income) ofthe micro business for a year of assessment.

d. In the case of a micro business that has migrated from the income taxsystem to the turnover tax system, certain income tax allowances that weregranted in the previous year of assessment and which would have been

added back to taxable income in the following year of assessment in theincome tax system e.g. debtors allowance. However, in order to avoiddouble taxation, this inclusion will be limited to the excess of theallowances over any balance of assessed loss that the micro business willbe prevented from carrying forward when it migrates from the income taxsystem to the turnover tax system.

The specific exclusions are:

a. Investment income (dividends, interest, royalties, rentals and annuities)received by sole proprietorships (individuals) and partnerships. Thisincome will be taxable in the hands of the individual recipients under thecurrent personal income tax provisions. The usual exemption allowanceswill be applicable i.e. interest and, otherwise taxable dividends, up toR21,000 per individual (for the year of assessment ending28 February 2010). Where the individual is 65 years and older, the currentexempt amount is R30,000 (for the year of assessment ending28 February 2010).

Please note that a micro business will be disqualified from using theturnover tax system where its investment income exceeds 10% of its total

receipts (income) for a year of assessment.

b. Certain Government grants that are exempt from income tax.

c. In the case of a business that has migrated from the income tax system tothe turnover tax system, any amount that accrued to the business, and wassubject to income tax in the hands of the business, in a year of assessmentprior to it registering for the turnover tax.

19. Is there a minimum amount/threshold below which micro businesses will

not be liable for the turnover tax?


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Yes. Based on the structure of the rates table for the 2009/10 year ofassessment, a micro business that is registered for the turnover tax will not beliable for any tax if its taxable turnover does not exceed R100,000 per annum.

20. Will a micro business still have to register for the turnover tax if itstaxable turnover is below the exempt threshold?

Yes. This will be a simplified registration process just to ensure that the microbusiness is a tax legitimate business on the SARS register. The microbusiness will be allocated a tax registration number, which could serve as anindicator that the business is tax compliant.

21. How will the returns and payments work?

This will essentially consist of one annual return with two interim (provisional)payments.

If liable, the micro business will be required to make two interim payments(with returns) one for the first six months of the year of assessment and theother for the full year of assessment, but after deducting the first interimpayment. An interim return will not be necessary where the micro business isnot liable for an interim payment.

An annual income tax return must be filed as part of the annual income taxfiling season.

Should it be found that the two interim payments were not sufficient todischarge the final turnover tax that will be determined on submission of theannual tax return, the relevant interest and penalties may apply.

Example:X has a business that expects to make a turnover of R600,000 perannum.

Xs tax liability according to the prescribed turnover tax table is

R13,000 for the year of assessment. In line with expectations, Xwill be expected to pay half of the R13,000 (R6,500) within sixmonths from the beginning of the year of assessment and thenext half (R6,500) by the last day of February. A third paymentmay be necessary where, for some reason, X underestimatedhis turnover for the year.

Lets say he found that his turnover for the year was actuallyR650,000 instead of R600,000. This means that his tax liabilityfor the year should have been R15,500 instead of R13,000. Hewill then have an opportunity to settle the underpayment of

R2,500 (R15,500 less R13,000) in a third payment when hesubmits his final income tax return.


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This can be illustrated as follows:

Estimated turnover for the year R600,000

Interim payment 1 by 31 August R6,500

Interim payment 2 by last day of February R6,500

Actual turnover per final annual tax return R650,000

Shortfall/final turnover tax payment with annual tax return R2,500Total turnover tax payable for the year of assessment R15,500

It must be noted that the estimate for the first interim payment must not beless than the taxable turnover of the previous year of assessment, unless

SARS agrees. Where the estimate of the taxable turnover for the secondinterim payment is less than 80 per cent of the actual taxable turnover for theyear of assessment, additional tax, equal to 20 per cent of the differencebetween the tax payable on 80 per cent of the actual taxable turnover for theyear of assessment and the tax payable on that estimate, will be charged.The additional tax may be waived in certain circumstances.

Interest at the prescribed rate will be charged on all late payments andunderpayments.

The prescribed turnover tax rates table per year of assessment (seeQuestion 17) must be used to determine the amount of interim tax that ispayable.

22. Where can the tax returns be obtained from?

The tax returns will be available on request from any branch office or they willbe available on the SARS website, www.sars.gov.za.

23. Surely a micro business must keep some form of records in the turnovertax system. What are these?

Yes, a micro business will be required to keep minimal records. These are:

o Records of all amounts received by the business for each year ofassessment;

o All dividends declared for the year of assessment;o Records of all assets with a cost price of more than R10,000 each;o Records of all liabilities that exceed R10,000 each.


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24. How will a person be taxed if he or she is in a partnership with familymembers or anyone else?

The person will be able to access the simplified tax system if the followingspecific requirements are met, in addition to the general requirements:

a. The turnover of the partnership must not exceed R1 million per annum;b. That person must not be a partner in another partnership;c. Any partner of the partnership must not hold a share or an interest in a

company, cooperative, or close corporation subject to a few exceptions(see 13(k) above).

d. All of the partners of the partnership must be individuals (e.g. they cannotbe companies).

e. The partnership must not be registered for VAT.

Where all requirements for the turnover tax are met, each partner will be taxed

on his share of the turnover based on the terms of the partnership agreement.The investment income of the partnership will also be taxed on this sharedbasis. Each partners share of the turnover and investment income will betaxed in his or her personal income tax return but separately from othersources of income i.e. it will be ring-fenced. The share of turnover will betaxed according to the tax rates for the turnover tax whilst the investmentincome will be taxed as it is currently taxed for personal income tax purposes.

25. Will a person also be penalised if one of his/her partners is a partner inanother partnership?

Not necessarily. The person can still access the simplified tax systemprovided that the following specific requirements, together with the generalrequirements in Question 13, are met:

a. The turnover of the partnership must not exceed R1 million per annum;b. That person is not a partner in another partnership;c. Any partner in the partnership must not hold a share or an interest in a

company, cooperative, or close corporation subject to a few exceptions(see 13(k) above).

d. All of the partners of the partnership must be individuals throughout theyear of assessment (e.g. they cannot be companies).e. The partnership must not be registered for VAT.

Since a partner who is a partner in another partnership will be disqualifiedfrom using the simplified tax system, that partner will require the partnership tomaintain sufficient records for him to comply with the current income taxsystem.

26. Will all dividend distributions by companies, close corporations, and

cooperatives be tax-free, even after the new dividend withholding taxreplaces secondary tax on companies (STC)?


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The qualifying micro business will be exempt from STC to the extent that thedividend distribution does not exceed R200,000 per annum.

If the distribution exceeds the R200,000 cap, the excess will be subject to

STC.

When STC is replaced by the dividend withholding tax, it is expected thatdividends will be specifically included in the taxable turnover of companies,close corporations and cooperatives from that point onwards.

27. Will a micro business pay less tax in the turnover tax system than in thecurrent tax system?

This will depend on the unique factors that affect the business e.g. profitability

of the business and whether or not it will be in a tax loss position in the currentincome tax system. Remember, the main objective of the simplified taxsystem is not necessarily to pay less tax but rather to reduce the taxcompliance burden and related costs for micro business.

28. How does a business decide on whether or not to use the simplified taxsystem?

If a business qualifies for the simplified tax system, it will have to decide onwhether this system will favour it more than the current tax system. Factorsthat can be taken into account in determining this are:

Record-keeping if this is too much of a burden or too expensive, theturnover tax will be a better option;

Meeting the requirements of the current tax system if this istechnically too difficult or too expensive to comply with, then theturnover tax is a better option;

Meeting the requirements of the current tax system by hiring a taxpractitioner if this is too costly then the turnover tax is a better option;

Is the business in a taxable income/assessed loss situation? if it is in aloss situation the current tax system will be a better option as no

income tax will be payable but records must be maintained and the taxlegal requirements must be complied with;

Will the tax payable in the current tax system be less than the turnovertax? If so, the current tax system will be a better option but recordsmust be maintained and the tax legal requirements must be compliedwith. The compliance costs must also be factored into the decision.

If the business is liable for less tax after taking expenses into account,then it can register or remain registered in the current income taxsystem instead of being registered for the turnover tax. The currentincome tax system also offers favourable tax concessions to smallbusiness corporations (cooperatives, close corporations and companies

with a turnover that does not exceed R14 million per annum).Registering in the current income tax system will also give the business


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the option of registering for VAT since a business will not be allowed toregister for VAT if it is registered for the turnover tax;

Do the main clients of the business prefer to deal with a business that isregistered for VAT as an indication of formality and good standing?Although this requirement cannot be forced on a business by anyone,

the business could consider registering for VAT to secure the relevantshare of the market. It must be noted that a business that is registeredfor the turnover tax cannot register for VAT.

29. How will income from other sources be taxed?

The turnover tax is a stand-alone tax. Therefore, as an individual or soleproprietor, the taxable turnover from a qualifying micro business will be ring-fenced from all other income i.e. the other income, including salaries fromseparate legal entities (e.g. companies), will be taxed separately under the

current income tax system.

It must also be noted that investment income (dividends, interest, royalties,annuities and rentals from immovable property) received by soleproprietorships (individuals) and partnerships will be taxable under the normalpersonal income tax provisions in the hands of the individual recipients.

30. Will the salaries paid by the micro business to its owners be subject totax in their hands?

This will be the case only if the business is a close corporation, company, or acooperative i.e. a separate legal entity. Where the business is a soleproprietor or a partnership, notional salaries drawn from the business by theowners will not be taxed separately in the hands of the individuals. Theseamounts will only be taxed as part of the taxable turnover of the business.This is in keeping with the legal principle that the soleproprietorships/partnerships and their owners are one and the same.

31. Is there a simplified dispensation for employees/payroll taxes?

There is no simple tax dispensation for payroll taxes like employees tax (SITEand PAYE), Unemployment Insurance Fund (UIF) Contributions, and the SkillsDevelopment Levy (SDL), which means that the current provisions will applywhere the micro business has employees. This is because these are notdirect charges on a business they are payments for and on behalf ofemployees. In terms of existing law, however, businesses whose employeesare not liable for employees tax will not be required to register for employeestax and businesses with a payroll of up to R500,000 will not be liable for theSDL.


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32. What happens if a micro business is in the simplified tax system anddecides to deregister as it no longer sees it as being beneficial?

The business has the option of deregistering, but only after it has been in theturnover tax system for 3 years. Furthermore, the business can only choose

to exit the turnover tax before the beginning of the year of assessment fromwhich it no longer wants to be in the turnover tax system. However, if thebusiness happens to close down, a pro-rata assessment in the turnover taxsystem will apply from beginning of the year of assessment to the date onwhich the business closed.

The business will not be allowed to re-enter the turnover tax system for threeyears.


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ANNEXURE

QUICK CHECK TO SEE IF A BUSINESS QUALIFIES FOR THE TURNOVER

TAX FOR A YEAR OF ASSESSMENT

(If the answer to any one of the following questions is No, the business will not qualify forthe turnover tax for that year of assessment)

QUESTION YES NO1. Will the qualifying turnover of the business be less

than or equal to R1 million for the year ofassessment? (See Question 13(b))

2. Do you declare that the business is not registered forVAT or, if it is registered for VAT, that you are willingto deregister it for VAT?

3. Do you declare that the business does not render a

professional service? (See Question 13(d))4. Do you declare that the business is not a personalservice provider or a labour broker without aSARS exemption certificate? (See Question 13(e))

5. Does the business trade in one of the followingforms: sole proprietor, partnership, close corporation,company, or cooperative?

6. If the business is a partnership, do you declare thatall the partners will be individuals throughout theyear of assessment?

7. If the business is a close corporation, company, orcooperative, do you declare that all of the

shareholders/members will be individuals throughoutthe year of assessment?8. Do you declare that the business is not a public

benefit organisation or a recreational club?9. Does the business have a year of assessment that

ends on the last day of February?10. Do you declare that the shareholders, members and

the business do not hold shares/interests in anotherclose corporation, company, or cooperative otherthan the exceptions listed in Question 13(k)?

11. Do you declare that the investment income is notexpected to exceed 10% of the total income of thebusiness for the year of assessment (See Question13(l))

12. Do you declare that the income from the disposal ofassets by the business over the year ofassessment" and the past two years of assessmentis not expected to exceed R1.5 million in total (SeeQuestion 13(m))?

13. Do you declare that the business was not registeredfor the turnover tax for any of the last three years ofassessment?

Note: If you are a partner in more than one partnership, you will not qualify for the turnover tax.Your partners will still qualify if they are only partners in a single partnership and answer Yes toall of the questions above."

54601_FAQsforMicroBusinesses20100115Final

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