1 / 27

Micro businesses: Turnover tax

Micro businesses: Turnover tax. Advantages of the turnover tax. According to SARS ‘the all-in-one tax that is simple and saves you time and money’ (?).

liberty-clemons
Download Presentation

Micro businesses: Turnover tax

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Micro businesses: Turnover tax

  2. Advantages of the turnover tax According to SARS ‘the all-in-one tax that is simple and saves you time and money’ (?) ‘Small businesses have the potential to grow the economy, generate jobs and reduce poverty. With this initiative in mind and in line with Government’s commitment to reducing the administrative burden on small businesses and cultivating an environment for entrepreneurship, SARS has designed a new single tax system as a tool for small businesses to help streamline their tax obligations.’

  3. Disadvantages of the turnover tax VAT deregistration Assessed losses A person might be subject to the turnover tax as well as normal tax. The disposal of certain capital assets might disqualify a person from being registered for the turnover tax.

  4. Micro business tax rates

  5. Micro business tax rates

  6. Who could qualify as a micro business? Natural person (including a partnership), or a company (including a close corporation). Qualifying turnover may not exceed R1m (excludes amounts of a capital nature) “qualifying turnover” means the total receipts from carrying on business activities, excluding any amount of a capital nature and certain amounts that would have been excluded from normal tax.

  7. Who could qualify as a micro business? In the case of a company (or CC) the shareholders (or members) must all be natural persons. The natural person or shareholders (in the case of a company or CC) may not at any time during the year of assessment hold any share or an interest in the equity of other company (there are exceptions).

  8. Who could qualify as a micro business? The person may not be rendering a professional serviceduring the year of assessment. “professional service” means a service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, broking, commercial arts, consulting, draftsmanship, education, engineering, entertainment, health, information technology, journalism, law, management, performing arts, real estate, research, secretarial services, The person may not be a personal service provider or a labour broker without an exemption certificate.

  9. Who could qualify as a micro business? Not more than 10% of the person’s total receipts may be from investment income. Investment income is defined as dividends, royalties, rental derived in respect of immovable property, annuities or income of a similar nature, any interest, any proceeds derived from investment or trading in financial instruments, marketable securities or fixed property. Total amount received from disposal of immovable property and business capital assets may not exceed R1,5m during a three year period. The three year period comprises of the current year of assessment and the immediately preceding two years of assessment, or such shorter period during which that person was a registered micro business.

  10. Who could qualify as a micro business? In the case of a company, its financial year must end on the end of February. If the person is a partnership: All partners must be natural persons Partners may not be partners in more than one partnership Qualifying turnover of the partnership may not exceed R1m

  11. What is qualifying turnover? The taxable turnover of a registered micro business in relation to any year of assessment consists of all amounts not of a capital naturereceived by that registered micro business during that year of assessment from carrying on business activities in the Republic. Including: 50% of receipts of a capital nature from the disposal of immovable property to the extent that it was used for business purposes and other assets mainly used for business purposes in the case of a company, investment income as defined in section 12E (other than dividends); Allowances granted in a previous year that should be added to income in a subsequent year to the extent that it exceeds the balance of assessed loss that is prevented from being carried forward in terms of s 20

  12. What is qualifying turnover? Excluding: In the case of a natural person, investment income (as defined in s12E) Amounts exempt from normal tax: certain government grants; certain export incentive rebates; state subsidies for the promotion of film production Amounts received by the micro business that accrued to it before registration as micro business if the amount was subject to income tax

  13. Interaction with other taxes Turnover tax Payroll taxes (PAYE, UIF, SDL) Normal tax (including capital gains tax) – Natural person Normal tax (including capital gains tax) – Company STC – first R200 000 dividend declared exempt Dividends tax – first R200 000 dividend declared exempt (s 64f(h)) Donations tax VAT (may not be registered)

  14. Interaction with other taxes Section 10(1)(zJ) exempt micro business income received or accrued from normal tax Natural person - Investment income NOT exempt (section 12E definition) Natural person -Remuneration NOT exempt (Fourth Schedule definition) Par 57A of the 8th Schedule disregard capital gain or loss - from the disposal of immovable property to the extent that it was used for business purposes and - other assets mainly used for business purposes Where a person is registered as a micro business, it may not register as a VAT vendor (s 23(8))

  15. Example 1 – natural person Mr X (50 years) has registered micro business as from 1 March 2009. Info for 2010 year of assessment as follows: R Business non capital receipts 745 000 Capital receipt (house – 10% as offices) 2 300 000 Doubtful debt allowance for 2009 7 500 Dividend income 5 000 Interest income 35 000 Payments from outstanding trade debtors as on 28 February 2009 20 000

  16. Example 1 – Natural person (cont)

  17. Small businesses Tax rates: Turnover tax vs Small business corporation`

  18. OR Turnover tax Salary vs dividends

  19. Turnover tax Administration of turnover tax system Voluntary deregister after period of three years. Compulsory deregister when exceed R1m threshold or is disqualified from being a micro business. Payment of turnover tax 6 months 6 months 01/03 31/08 28/02 Turnover tax on 50% of estimated taxable turnover Turnover tax on estimated taxable turnover 20% penalty if estimate less than 80% of actual May generally not be less than previous year

  20. OR AND s 8(2) VAT deregistration VAT compulsory registration threshold Threshold for compulsory VAT registration increased to R1m from 01-03-2009. If a person ceases to be a VAT vendor a deemed supply takes place in terms of s 8(2) of the VAT Act: All goods (excl goods iro which an input tax was denied) Are deemed to be supplied immediately before person cease to be a vendor Cost Consideration for deemed supply is lesser of: Open market value All rights capable of assignment

  21. VAT deregistration If a vendor has not fully paid the supplier of the goods or services but originally claimed an input tax, output tax on the unpaid balances will also become payable if he ceases to be a vendor (s 22(3)(b) and 22(3) proviso (ii)(dd)).

  22. AND s 8(2D) s 10(5A) s 8(2C) VAT deregistration If a person ceased to be a vendor because of the sole reason that: The person registered as a micro business The person’s taxable supplies are less than R1m The value of the deemed supply must be reduced by R100 000 The person ceases to be a vendor before 30-06-2009 VAT on deemed supply is payable in six equal monthly instalments (or period that CIR allows) VAT on deemed supply is payable in six equal monthly instalments (or period that CIR allows)

  23. VAT deregistration EXAMPLE A client has registered as a vendor during 2001 when his taxable supplies exceeded the R300 000 threshold. At present his taxable supplies is about R800 000 per annum. The client carries on a manufacturing enterprise. He considers to register as a micro business and has to deregister for VAT. His balance sheet shows the following assets (at cost): Land and buildings R500 000 Machinery R800 000 Trading stock R250 000 Debtors R150 000 Creditors R120 000 What are the VAT consequences if the client deregisters as a vendor?

  24. VAT deregistration EXAMPLE The cost and open market value of the clients assets are as follows:

  25. VAT deregistration EXAMPLE The VAT consequences from the deregistration as a VAT vendor is as follows: Lesser of cost / open market value of assets R1 705 000 The supply of debtors is however an exempt supply (s 2(1)(c) and s 12(a)) (R130 000) Section 10(5A) reduction (R100 000) Standard rated supplies R1 475 000 Output VAT liability (R1 475 000 x 14/114) R181 140

More Related