As part of Government’s broader goal to improve economic growth, National Treasury and SARS have implemented two tax schemes to create an enabling environment for small businesses to survive and grow and thereby to encourage entrepreneurship, job creation and economic productivity gains for a greater number of people in the working age population. These two policies include Turnover Tax, which targets micro businesses with a qualifying taxable turnover not exceeding R1 million, and Small Business Corporation Tax, targeting businesses with a gross income not exceeding R14 million. Turnover Tax is tranched and a marginal tax rate applied to each tranche, while SBCs qualify for reduced tax rates and accelerated depreciation of depreciable assets.These existing tax policies appropriately target early-stage businesses at their most vulnerable stage, requiring tailored support to secure, consolidate and stabilise small businesses and enabling them to reach a more mature growth phase. Stakeholders indicated that these policies SBC and Turnover Tax could do with refinements to optimise their relevance for small businesses and specifically could assist to increase the amount of working capital available to SMEs. Largely, feedback suggested that these policies should be streamlined, better reflect what constitutes an SME, and recognise the different and varied stages of development in the tax code.Proposals click on headings to view related proposals
Proposal 1: Remove Turnover Tax.
Given the relatively low uptake of turnover tax, with only some 8,700 registered users currently making use of the regime versus approximately 161,000 SBC tax users, we would recommend removing turnover tax and incorporating current users of this framework under the SBC framework instead, simultaneously increasing the threshold for what would have been Turnover Tax compliant SMEs to a size of turnover not exceeding R5million. Effectively, therefore, if accepted this proposal means that Turnover Tax SMEs would become entry level SBC SMEs with turnovers not exceeding R5 million per annum.
Proposal 2a – h: Reduce Compliance Costs for small businesses.Proposal 3: Review maximum turnover qualification for SBCs to consider inclusion of high growth businesses.Proposal 4: Review the current SBC tax rate thresholds to maximize intended assistance for SMEs to become established and mature.Proposal 5: Provide tax incentives for SMEs that grow permanent workforce.Proposal 6: Tax exemption on grants made to qualifying SBCs for the purposes of expansion.