Turnover Tax
Turnover tax is a simplified tax system designed for micro‑businesses with an annual turnover of up to R1 million. It replaces income tax, VAT, provisional tax, PAYE, SDL and capital gains tax with a single tax on turnover.
Key Features
- Graduated Rates: Tax rates range from 0% to a maximum (for example, 3% to 7% depending on turnover).
- No Deductions: You pay tax on total sales, not profit.
- Simple Record‑Keeping: No need for complex accounting or filing VAT returns.
- Restrictions: Certain activities (e.g. personal services, professional consultancies) may not qualify.
Small Business Corporate Tax (SBC)
SBC tax applies to qualifying private companies and close corporations with a turnover of up to R20 million, and all shareholders or members must be natural persons.
Key Features
- Progressive Rates: Lower tax rates apply to profits up to certain thresholds (e.g., 0% up to the first R95,750, then 7% on the next bracket, etc.).
- Eligible Deductions: You can deduct business expenses from your income.
- Access to VAT and Other Schemes: SBC companies continue to follow standard VAT and PAYE rules.
Choosing Between Them
- Choose Turnover Tax If: You have a tiny business with minimal expenses, simple operations and turnover under R1 million.
- Choose SBC if your business has higher turnover, significant expenses to deduct, or growth prospects exceeding R1 million.
- Note: You can’t be simultaneously registered for both; evaluate carefully and consult a tax practitioner.