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How to find out if your company qualifies for turnover tax

by , 21 May 2013
Did you know that before the introduction of turnover tax all businesses, even tiny start-ups, were forced to register for income tax? This was problematic as they battled to meet the tax requirements, complete all the forms, pay over all the taxes and meeting all the deadlines. Luckily, turnover tax has removed this burden with one simple tax. Read on to find out if your business qualifies so you can avoid wasting time and money paying Vat, provisional tax, income tax and Capital Gains Tax when you don't have to.

But, for your company to qualify for turnover tax, certain requirements must be met first.

Your company qualifies for turnover tax if you answer 'yes' to these nine questions

According to the Practical Tax Loose Leaf, answer yes to all of the following questions to qualify for turnover tax:

  1. Will your turnover be R1 million or less for the year of assessment?
  2. Does your financial year end fall on the last day of February?
  3. Can you confirm that you weren't registered for turnover tax in the last three years?
  4. If you earn income from 'professional services', can you confirm that it's not more than 20% of the total income for the year?
  5. If your business has disposed of assets, can you confirm that the total income from this disposal (over the last three years) is less than R1.5 million?
  6. Do you agree that your business isn't a public benefit organisation (PBO) or a recreational club?
  7. Can you confirm that the business is NOT a Personal Service Provider?
  8. Will all existing shareholders or members remain natural persons throughout the coming year of assessment?
  9. Can you confirm none of the shareholders (or the business) holds shares or interests in a Close Corporation (CC), company or cooperative? Remember, shares or interest includes interest in:
  • Listed South African companies;
  • Collective investment schemes;
  • Body corporates and share block companies;
  • A company that didn't trade during any year of assessment and which didn't own assets with a total market value that exceeds R5 000 during any year of assessment; or
  • Any company that has taken steps to liquidate wind up or deregister.

Keep in mind that if your company answers NO to any of these questions, your business doesn't qualify for turnover tax. You'll be also be disqualified if you exceed the R1 million turnover mark or if you fail to meet the above criteria once you've joined the system.

To apply for turnover tax, complete the TT01 form on SARS' website.

Recommended Product: The Ultimate Turnover Tax Guide. Find out how to pay less tax with turnover tax.


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