Taxation of Micro Businesses

Some businesses that earn less than R1 million per year may only have to pay one type of tax and submit three tax returns per year..

Instead of having to pay income tax, value added tax, capital gains tax and dividend tax, a micro business will only pay turnover tax. It will submit one income tax return and two provisional tax returns per year.

The business will pay tax at lower rates, for example 1% if the turnover of the business is R335,000.

Beware, though. The main aim of these rules is not to reduce the tax rate of small businesses, but to make their tax returns simpler. In some cases a small business will pay more tax on the turnover tax system and should rather stick to the normal income tax system.

For example, if your company earns R600,000 per year, but its expenses are more than that (in other words the company makes a loss) the turnover tax will be R3,659, but the income tax will be zero.

Contact us for advice on whether you should register your business for the turnover tax.

Taxation of micro businesses