Turnover tax 2

Question 1

Transitional rules: Micro business registered during the year of assessment
Amounts already taxed for normal tax purposes
(Normal tax)

Answer 1

All amounts that a micro business received are exempt for turnover tax purposes to the extend such amounts were subject to normal tax when it accrued in any previous year of assessment prior to the registration of the entity as a micro business.

Question 2

Transitional rules: Micro business registered during the year of assessment
Capital allowances
(Normal tax)

Answer 2

A person purchased an asset while registered for normal tax, but all the capital allowances on such assets have not yet been claimed on the date that the person elects to register as a micro business, no remaining allowances or deductions for such assets may be claimed by the micro business

Question 3

Transitional rules: Micro business registered during the year of assessment
Balance of assessed loss brought forward
(Normal tax)

Answer 3

An assessed loss balance per s 20 cannot be used to reduce the taxable turnover of the registered micro business for a year of assessment

Question 4

Transitional rules: Micro business registered during the year of assessment
Taxation of dividend declared
(Dividend tax)

Answer 4

No additional transitional rules are provided for in respect of dividend tax when a person registers as a micro business i.e. accumulated profits relating to the period prior to being registered as a micro business is exempt from dividend tax, unless the dividends exceed R200 000 limit per year.

Question 5

Transitional rules: Micro business deregistered during the year of assessment
Compulsory deregistration

Answer 5

the micro business revert from the turnover tax regime into the normal tax regime with immediate effect (i.e. first day of the month during which the business is no longer registered for turnover tax)
Assessed for 2 periods during the year of assessment
(i.e. turnover tax period and normal income tax period)

Question 6

Transitional rules: Micro business deregistered during the year of assessment
Voluntary deregistration

Answer 6

Taxpayer liable for current Income Tax for the full year of assessment, as voluntary deregistration is always effective from commencement of YOA

Question 7

Transitional rules: Micro business deregistered during the year of assessment
Amounts received by micro business, but not yet accrued
(Normal tax)

Answer 7

Amounts received by micro business, but not yet accrued, are not included in the normal taxable income calculation of that person

Question 8

Transitional rules: Micro business deregistered during the year of assessment
Amounts accrued to a micro business (not yet received)
(Normal tax)

Answer 8

Amounts accrued to a micro business , but only received subsequent to deregistration, are not taxed under the turnover tax system. However, during the year of assessment which such amounts are receipted, only 20% of these amounts will be included in the normal tax calculation.

Question 9

Transitional rules: Micro business deregistered during the year of assessment
VAT

Answer 9

The qualifying turnover > R1 million for YOA
The deregistered micro business now needs to consider the VAT registration requirements.
If a deregister micro business becomes a VAT vendor the following needs to be considered
Output VAT on certain deemed supplies – (s 78A(2) of the VAT Act)
The denial of input VAT on certain expenses – (s 78(3) of the VAT Act)
Input VAT adjustment on assets (s 18(4) of the VAT Act)

Question 10

Transitional rules: Micro business deregistered during the year of assessment
Output VAT on certain deemed supplies
(s 78A(2)

Answer 10

Supplies were made when business was registered as a micro business, but receipts in respect of these supplies were only obtained subsequent to registering as a VAT vendor and deregistration as a micro business. Thus, VAT will now levied on these supplies (i.e. deemed supply), as these receipts have not been included in the ‘taxable turnover’ of the micro business. Time of supply is period during which receipts are receipted.

Question 11

Transitional rules: Micro business deregistered during the year of assessment
Denial of Input VAT
(s 78(3))

Answer 11

Any VAT paid on expenditure that the person incurred while being registered as a micro business may not be claimed as input tax subsequent to registration as a VAT vendor.
Thus, for deregistered micro businesses, input VAT can only be claimed on expenses incurred subsequent to the registration as a VAT vendor.

Question 12

Transitional rules: Micro business deregistered during the year of assessment
Input VAT adjustment on assets (s 18(4) of the VAT Act)

Answer 12

The new VAT vendor can claim a deemed input VAT adjustment in respect of assets that are on hand on the date of the VAT registration and if these assets will be used in course and furtherance of its enterprise.
Input VAT adjustment = lesser of the cost or market value of the assets