Small Business Tax

[vamily0804]

Hi all,

Does a small business corporation have to register with sars as a small business or qualify the taxpayer automatically if his income is less than i think R 1 000 000.00 ?

[geraldenek]

Hi

On the income tax form which you submit to SARS yearly (IT14) there is a question they ask if you are a small business corporation. But a small business corporation have to meet the following requirements:

A small business corporation is defined in the Income Tax Act as follows:

a close corporation or private company which is not an employment company (an employment company is a labour broker not holding an exemption certificate, or a personal service company),


employment companies with at least 4 full-time employees for core operations


the entire shareholding or membership of which is held by natural persons,


the annual turnover does not exceed R14 million


of which none of the shareholders or members, at any time during the year of assessment, holds shares in any other company (other than listed companies),


of which not more than 20% of the gross income consists collectively of investment income and the rendering of personal services by the members or shareholders (personal service being defined as any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, broking, commercial arts, consulting, draughtsmanship, education, engineering, entertainment, health, information technology, journalism, law, management, performing arts, real estate, research, secretarial services, sport, surveying, translation, valuation or veterinary science, which is performed personally by any person who holds an interest in the company or close corporation referred to in the definition of "small business corporation").

[3x-a-d3-u5]

I think this might be what you're after: http://www.sars.gov.za/home.asp?pid=43122

1. WHAT IS TURNOVER TAX?

Turnover Tax is a simple tax that is being introduced for small businesses. The objective is to reduce the tax compliance and administrative burden by simplifying and reducing the number of returns that have to be filed. A typical business may currently be liable for submitting the following to SARS: 1) Value-Added Tax (VAT), 2) Income Tax, 3) Provisional Tax, 4) Capital Gains Tax (CGT) and 5) Secondary Tax on Companies (STC). The simplified tax system will replace all these taxes with a simple Turnover Tax for small businesses i.e. businesses with a turnover not exceeding R1 million per annum and who meet all the criteria. Some time ago, a briefing document was published on our website for public comment. After consolidation of the customer feedback, we are now introducing Turnover Tax for application between 1 March 2009 and 30 April 2009.

The rates that were announced in the 2008 National Budget were revised downwards, the revised rates for the 2009/10 year of assessment are as follows:

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

Not sure if that's what you're looking for.

[Dave A]

Either way, it does not seem to be automatic. You do need to apply.

[duncan drennan]

Either way, it does not seem to be automatic. You do need to apply.

Yes, and you can only change once every 3 years, unless you go over the R1mil compulsory mark.

[3x-a-d3-u5]

As far as I understand it then, its a toss up between sales and profit. If you have a high profit margin go for the turnover route. If you have a high turnover and lower profit go for proft (normal) route.

Am I correct?

[duncan drennan]

As far as I understand it then, its a toss up between sales and profit. If you have a high profit margin go for the turnover route. If you have a high turnover and lower profit go for proft (normal) route.

Am I correct?

Pretty much. Just have to factor in record keeping and tax return administration. Turnover tax replaces income tax, provisional tax, capital gains tax, VAT, and secondary tax on companies, so there is much less admin involved. You also only need really basic record keeping (I personally like detailed record keeping though).

If I understand correctly from my brief scanning of the documents you will have to deregister for VAT, so anyone considering this route will have to have a look at the impact of that on their business.

[Dave A]

If you have a high profit margin go for the turnover route. If you have a high turnover and lower profit go for proft (normal) route.

I'd agree with that.

I personally like detailed record keeping though.

Me too. In fact, I would hope that despite the freedom given by the turnover tax system, a small business would try to get some sort of management accounts system in place as soon as it is able.

I think turnover tax is going to be a boon for new and emerging businesses as they get off the ground. But as that little creation grows, it can turn into quite a messy, inefficient monster if you're not collecting the data you need for management and strategic decisions.

The best part is an emerging business is going to be able to stay legit on the tax front all the way through. I suspect many a successful emerging business avoids becoming part of the formal economy not just because they will need to start paying taxes, but also out of an awareness that they could already be facing a big tax bill for what they've been doing up to that point.

[vamily0804]

Thanks for all the info. I will tick off the option on the it14 form. Another problem I have is when its a new company (1st year) and I'm doing the prov tax via efiling which automaticaly calc the tax, so the company had to pay tax on the normal tax rates. I could not find a option for small business, maybe I missed it.

[duncan drennan]

Another problem I have is when its a new company (1st year) and I'm doing the prov tax via efiling which automaticaly calc the tax, so the company had to pay tax on the normal tax rates. I could not find a option for small business, maybe I missed it.

That is an interesting point. I wonder what the "right" way to handle it is - under declare your nett income so that the provisional payment is correct? It should balance out in the end of year return. Anyone have any ideas?

[eitai2001]

That is an interesting point. I wonder what the "right" way to handle it is - under declare your nett income so that the provisional payment is correct? It should balance out in the end of year return. Anyone have any ideas?

I qualify as a SBC. When I went to SARS, they told me you don't register, you just tick (but they may investigate whether you qualify or not).

In terms if the Provisional Tax, both on and offline, I was told to fill in the numbers as 0. Maybe its wrong ... but I've had my provisional tax for 2 years submitted like that and no SARS on my footstep. However, where it says Notes, I write that my company qualifies as an SBC.

[Ballack]

Nice thing. There are so many confusions in the minds of people about the tax payment. There are different tax laws for different businesses like small business, medium business and large business. There are so many professionals and experts available to help people in these regards. People can take help of them.