ARTRIGHT is a project established to promote professional practice and business acumen in the South African visual arts community.

Turnover Tax

Content developed by SARS

What is Turnover Tax

Turnover tax is only available for small businesses that turnover less than R1m per year. It is a very simple tax that is calculated on your business's turnover for a single year. Normally tax is charged on your profit for that year. Profit is calculated as your turnover less your expenses. 

In this case most expenses are not taken into account, which means that it is not necessary to determine which expenses are tax-deductible and how to claim them. 

This method of paying tax is great for small businesses where record keeping is costly. The tax payable can very quickly be determined by simply looking at all your income for that year. Turnover tax is also very inexpensive compared to other Tax structures as you do not need to hire tax consultants to administrate your tax (as its soo easy) and the % of tax paid on your earning is normally lower than other company taxes. 

ARTRIGHT suggests that small businesses and artists use Turnover Tax. (Read our Terms & Conditions)

How does Turnover Tax Work?

Unlike income tax where you calculate your income and expenditure and apply all kinds of rules to deduct what money you owe, Turnover Tax simply calculates your tax owed based on your turnover for that year. This means you do not have to keep accurate records of your expenses. 

When and How do you pay Turnover Tax?

Turnover Tax is charged during the course of year of assesement which runs from 1st March till the end of February. 

Two provisional payments are made every six months based on your turnover to date. 

To make your Turnover Tax payments, first calculate your Turnover Tax by using the simple to use tax table below then make your payment. The simplest payment method is to make on EFT (electronic funds transfer) using your internet banking. This can be quickly done at home. Alternatively payments can be made at your bank or any SARS branch. Internet banking is much simpler and more convenient. 

Turnover Rates

The Turnover Tax rates for 2010/2011 is shown in the table below. 

How To Choose between Standard Tax Systems and Turnover Tax

Businesses that qualify for turnover tax can choose to register for the standard tax system or turnover tax. 

  • Factors that may help with this decision are: 
  •      - Record-keeping – if this is too much of a burden or too expensive, the turnover tax 
  •        will be a better option. 
  •      - Meeting the requirements of the standard tax system – if this is technically too difficult 
  •        or too expensive to comply with, then the turnover tax is a better option. 
  •      - Meeting the requirements of the standard tax system by hiring a tax practitioner – if 
  •        this is too costly then the turnover tax is a better option. 
  •      - Is the business in a taxable income/assessed loss situation? if it is in a loss situation – 
  •        the standard tax system will be a better option as no income tax will be payable but 
  •        records must be maintained and the tax legal requirements must be complied with.
  •      - Will the tax payable in the standard tax system be less than the turnover tax? If so, the 
  •        standard tax system will be a better option but records must be maintained and the tax 
  •        legal requirements must be complied with. The compliance costs must also be factored 
  •        into the decision. 
  •      - Do the main clients of the business prefer to deal with a business that is registered for 
  •        VAT as an indication of formality and good standing? Although business is not forced 
  •        to comply with this requirement, the business can consider registering for VAT to 
  •        secure the relevant client base. A business cannot be registered for Turnover Tax and 
  •        VAT. 

Do I qualify for Turnover Tax?

Only small businesses that meet certain criteria can register for Turnover Tax for instance, businesses that sell goods can register.  

Businesses, Consultants and professionals that provide a service are not allowed to register for turnover tax.

Artists often consult, lecture and provide professional services to the industry. This income cannot fall under Turnover Tax. But any artwork they produce and sell, can fall under Turnover Tax. So it is good to separate your two different income streams accordingly to benefit from the savings that Turnover Tax can offer. 

ARTRIGHT recommends that artists who produce their own work and receive significant income from the sale of work, register and use Turnover Tax as a simple cost effective way to manage your taxes. 

To see if you are eligible please visit SARS / Turnover Tax for more information.

Please note : Consult your accountant first and read our Terms & Conditions