Simpler tax for small firms

Johannesburg - A new tax system which will lower the time and cost of submitting tax returns for small businesses has been launched, the South African Revenue Service said in a statement on Wednesday.

"This initiative is in line with government's broader mandate to encourage entrepreneurship and create an enabling environment for small businesses to survive and grow," Sars said.

Known as Turnover Tax, the tax system was available to small businesses with a turnover up to R1m a year and replaced income tax, provisional tax, capital gains tax, secondary tax on companies and VAT.

"Turnover Tax is part of the introduction of a simplified tax system to reduce the tax compliance burden on small businesses which was announced in the 2008 Budget by the minister of finance."

Its introduction this week coincided with an increase in the compulsory VAT registration threshold from R300 000 to R1m.

Under the Turnover Tax system, qualifying small businesses would only need to submit two interim returns and a final return for assessment.

"This represents a huge saving in time and costs relating to the current provisional tax, income tax and VAT system which requires businesses to submit an average of 10 returns a year," Sars said.

According to independent research commissioned by Sars and National Treasury, it cost small businesses an average of about R7 000 a year to ensure that tax returns for income tax, provisional tax, VAT and employees' tax were prepared, completed and submitted as required, the statement read.

The Turnover Tax system would be available to sole proprietors, partnerships, close corporations, co-operatives and companies - provided they had a taxable turnover of R1m or less in a year of assessment and met certain other criteria.

It was not available to labour brokers, personal service providers or persons that rendered professional services. Public benefit organisations and recreational clubs also did not qualify.

Small businesses already registered for VAT that opted to register for the Turnover Tax would automatically be deregistered from the VAT system if their application for Turnover Tax was successful.

According to Sars the Turnover Tax system was voluntary, so qualifying small businesses could choose whether to register for it or not.

- Sapa