Turnover Tax in South Africa: What It Is and Are You Eligible?

Turnover tax is a simplified tax system designed for micro businesses. It replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax, and Dividends Tax for qualifying businesses with an annual turnover of R2.3 million or less. A micro business registered for turnover tax can, however, elect to remain in the VAT system from 1 March 2012.

What Is Turnover Tax?

Turnover tax is calculated against a business’s turnover (total receipts) rather than profit. This reduces the administrative burden for business owners who don’t need to understand which expense items are deductible for tax purposes — the tax is simply applied to what you earn.

Who Qualifies?

Turnover tax is available to sole proprietors, partnerships, companies, and close corporations whose qualifying annual turnover is below R2.3 million. To qualify, the business must also:

• Have a financial year end of 28/29 February each year
• Not derive more than 20% of turnover from professional services (accounting, law, architecture, engineering, IT, health, etc.)
• Have shareholders or owners who are natural persons (not companies, CCs, or trusts)
• Not have disposed of business assets exceeding R1.5 million in proceeds
• Not be a Public Benefit Organisation, labour broker, or recreational club

See the SARS website for the complete eligibility criteria.

What Counts as “Qualifying Turnover”?

Qualifying turnover is the total receipts from carrying on business activities, excluding:

• Proceeds from the sale of assets (these are excluded from the R2.3 million threshold, though 50% of asset sale proceeds is included in taxable turnover)
• Certain government grants exempt under the Income Tax Act

Current Turnover Tax Rates (2025/26)

The following rates apply to the taxable turnover of a micro business. Note: always verify current rates with SARS for the current year of assessment.

• R0 – R335,000: 0%
• R335,001 – R500,000: 1% of the amount above R335,000
• R500,001 – R750,000: R1,650 + 2% of the amount above R500,000
• R750,001 – R1,000,000: R6,650 + 3% of the amount above R750,000

Other Tax Implications

Businesses registered for turnover tax are exempt from Capital Gains Tax, though 50% of proceeds from asset sales must be included in taxable turnover. Dividend distributions of up to R200,000 per year are exempt from Dividends Withholding Tax (DWT). DWT at 20% applies to dividends in excess of R200,000.

Businesses registered for turnover tax with turnover under R2.3 million are not required to register for VAT.

Submitting Returns

Businesses on turnover tax submit two provisional returns (August and February) and a final annual return. Registration and returns can now be submitted via the SARS Online Query System (SOQS) — a branch visit is no longer required for most interactions.

When the Business Exceeds the Threshold

If your business exceeds the R2.3 million threshold, you must notify SARS and deregister within 21 days. Deregistration can be initiated through SOQS or at a SARS branch.

For advice on whether turnover tax is the right choice for your business, contact DigMe Solutions.