Turnover Tax: What You Need to Know

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If you are registered as a company or sole proprietor in South Africa, you can choose to pay either standard small business income tax rates or turnover tax.


Turnover tax is a simplified tax rate aimed at reducing administration for small businesses with an annual turnover of less than R1 million. If your turnover goes over R1 million, then you will need to register for VAT and pay tax on the standard tax rates.

You can be registered for turnover tax and be registered for VAT (voluntary registration).

To make record keeping easier, the turnover tax system automatically estimates a company’s business expenses when calculating taxable income. This means businesses registered for turnover tax don’t need to track and report their tax-deductible expenses.

Also, small business owners will usually pay a lower tax rate under the turnover tax system than the standard tax system and may not even have to pay tax at all depending on their annual income.

The tax rates are:

For 2025 (1 March 2024-28 February 2025)

Taxable turnover (R)   

Rate of tax (R)

1 – 335 000

0% of taxable turnover

335 001 – 500 000

1% of taxable turnover above 335 000

500 001 – 750 000

1 650 + 2% of taxable turnover above 500 000

750 001 and above

6 650 + 3% of taxable turnover above 750 000

So, in summary, the eligibility criteria for turnover tax:

1) Annual turnover must not exceed R1 million.

2) The business must be a sole proprietor, partnership, close corporation, cooperative, or company.

3) Certain activities are excluded from turnover tax, such as personal service providers and certain professional services.

According to SARS, a personal service provider is typically:

  • A Company or Trust: That provides services to a client and the services are rendered personally by a person who is a connected person in relation to the company or trust.

  • Income Derived Mainly from Personal Services: The entity earns most of its income from services rendered by the owner or connected person.

  • Employment-Like Relationship: The individual rendering the service would be regarded as an employee if the service was provided directly to the client, rather than through the company or trust.

Exceptions and Special Cases when it comes to personal services:

  • Independence Test: If the service provider can demonstrate that they are not subject to control or supervision regarding the way the duties are performed or hours of work, they might not be classified as personal service providers.

  • Service providers with multiple, unrelated clients might qualify for turnover tax even if they provide personal services.

Types of activities classified as personal services:

  • Consultancy: Services provided in an advisory capacity, including management consulting, strategic planning, and business advisory services.

  • Broking: Services that involve acting as an intermediary between buyers and sellers, such as stockbrokers, insurance brokers, and real estate agents.

  • Information Technology (IT): Services related to computer programming, software development, systems analysis, and other IT consulting services.

  • Engineering: Professional engineering services, including civil, mechanical, electrical, and other types of engineering consulting.

  • Architecture: Architectural services, including the design and supervision of building projects.

  • Law: Legal services provided by attorneys, advocates, and other legal professionals.

  • Accounting: Services provided by accountants, bookkeepers, auditors, and other financial consultants.

  • Health: Medical and healthcare services provided by doctors, dentists, psychologists, physiotherapists, and other healthcare professionals.

  • Performing Arts: Services related to the performing arts, including actors, musicians, and dancers.

  • Sports: Professional sports services, including coaching and training.

  • Journalism: Services provided by journalists, writers, and authors.

  • Translation and Interpretation: Services provided by translators and interpreters.

  • Training and Education: Services provided by educators, trainers, and instructors in various fields.

For many small business owners, there are advantages to opting for turnover tax over the standard small business tax.

You can use this quick test to see if you will qualify for turnover tax.

However, keep in mind that expenses are purely an estimation under the tax turnover system. If you have very high tax-deductible expenses that would reduce your taxable income significantly, it may be in your best interest to claim them under the standard tax system.

There isn’t a one-sized solution that fits all. Consider your business situation and make the right decision for you.

One big advantage of turnover tax is that you don’t need to keep all your documentation to support your expenses.

The following records must be kept if you are on turnover tax:

  • Records of all amounts received.

  • Records of dividends declared.

  • A list of each asset with a cost price of more than R10,000 at the end of the year of assessment as well as of liabilities exceeding R10,000.

If you would like to know if you qualify, or whether you would benefit from turnover tax, please get in contact with us.