Turnover tax is a simplified tax for micro businesses with qualifying annual turnover of R2.3 million or less, up from R1 million from 1 April 2026. It replaces income tax, VAT, provisional tax, capital gains tax and dividends tax with a single tax on turnover, charged at 0% to 3% on the 2026/27 scale (SARS turnover tax page).
It is not automatically the cheaper option. Here are who qualifies, what it replaces and what it does not, the rates, and the exclusions.
Business Requirements at a Glance
- Turnover limit: R2.3 million or less per year (from 1 April 2026). The first R600,000 is taxed at 0%.
- Who may qualify: individuals (sole proprietors), partnerships, close corporations, companies and co-operatives.
- Exclusions: a company is disqualified if investment income plus professional service income exceeds 20% of its total receipts. For individuals, the 20% limit applies to professional service income.
- Professional services include accounting, architecture, consulting, engineering, health, information technology and law, among others.
- Still required: employees’ tax, SDL and UIF if you employ people.
Registration and Legal Requirements
Turnover tax is governed by the Sixth Schedule to the Income Tax Act 58 of 1962. Qualifying turnover means receipts from carrying on business activities. If you are a VAT vendor, the VAT you charge counts towards it (SARS Tax Guide for Micro Businesses).
The guide also sets conditions on who may hold shares or interests in a qualifying business. Check the exact terms with SARS before you register. The same applies to the rules on leaving the regime and when you can re-enter it.
If your qualifying turnover goes above the limit, you must move to normal tax and notify SARS within 21 days of the threshold being exceeded.
A micro business registered for turnover tax can choose to remain in the VAT system. Compare the two before you decide.
Documents and Ownership Information Required
- A SARS tax reference number for the business or the individual
- Records of all amounts received
- Records of dividends declared
- A list of assets and liabilities each worth more than R10,000 at the end of the year
- Proof of your shareholding or interests, to confirm eligibility
Tax, Licence and Compliance Requirements
Tax is calculated on taxable turnover, with no deduction for expenses. For years of assessment ending between 1 March 2026 and 28 February 2027, SARS publishes this scale:
- Up to R600,000: 0%
- R600,001 to R950,000: 1% of the amount above R600,000
- R950,001 to R1.4 million: R3,500 plus 2% of the amount above R950,000
- Above R1.4 million: R12,500 plus 3% of the amount above R1.4 million
Because expenses are not deducted, a business with thin margins can pay more than it would under normal tax, and a loss-making year still attracts tax on the turnover. A business with few expenses often pays less. Run both calculations on last year’s figures before you register.
Turnover tax does not cover payroll. A micro business must still withhold employees’ tax, SDL and UIF. If you are also considering the small business corporation regime for a company, compare that too. We have not checked its rates, so confirm them with SARS.
Process, Deadlines and Ongoing Obligations
Register on the TT01 form. SARS’s micro business guide (Issue 3, which still shows the old R1 million limit) says to elect before 1 March of a year of assessment, or within two months of starting business. Confirm the current rules on the SARS turnover tax page.
- Pay in two interim payments, on the last business day of August and February.
- Submit the annual TT03 return between 1 July and 31 January, with a final payment.
- Keep records of everything you receive.
Frequently Asked Questions
What is turnover tax?
A simplified tax for micro businesses with annual turnover of R2.3 million or less, charged on turnover instead of profit. It replaces income tax, VAT, provisional tax, CGT and dividends tax.
Is turnover tax cheaper?
Not automatically. It is charged on turnover with no expense deductions, so a business with thin margins can pay more than under normal tax.
What if I make a loss?
Tax is still calculated on your turnover, so a loss does not reduce it.
Does it replace all my taxes?
No. Employees’ tax, SDL and UIF still apply. A micro business can also elect to remain in the VAT system.
Can I leave the regime?
You must leave if your turnover exceeds the limit, and you must notify SARS within 21 days. For voluntary exit and re-entry, check the current rules with SARS.
Thresholds, rates and dates are set by SARS and are revised. Confirm current requirements with SARS or a registered tax practitioner before registering. See business and compliance requirements and company registration requirements.