4. At what rate is Turnover Tax calculated?
The Ninth Schedule to the principal Act is amended by the deletion of Part II and the substitution therefore of the following:
|Turnover per annum|| Tax Rate|
|K800,000 or below ||4 %|
This amendment introduces a flat rate of 4% for turnover tax. Therefore, the tax payable will be calculated by applying 4% on the total turnover. Prior to this change turnover tax was computed using the graduated tax bands.
Furthermore, this amendment removes the K3,000 exemption that was applicable under the graduated tax bands. When determining the tax payable for the period, the K3,000 monthly exemption will no longer be applicable.
The example given below can be followed:
Example 1: Computation of Tax on Turnover of K8,000.
AB limited carries on business as a retailer. In the month of January 2019 the business made the following sales:
- Cash sales K3,000.00
- Credit sales K5,000.00
Total Sales K8,000.00
Turnover tax payable = K8,000.00 X 4% = K320.00
Net sales will therefore be = K8,000.00 - K320.00 = K7,680.00
5. How is Turnover Tax calculated?
Turnover Tax is calculated on gross sales/turnover.
6. Are there any returns to be submitted for Turnover Tax?
Yes. Turnover Tax Remittance Cards are to be submitted by the 14th of the month following the month in which the transactions occurred.
- − Manually by the 5th of the following month to which the return relates and
- − Electronically by the 14th of the month following the month in which the transactions occurred.
7. When should payment for Turnover Tax be?
Remittance for Turnover Tax is due by the 14th of the month following the month in which the sales are made.
8. For how long are taxpayers expected to keep business records?
Taxpayers will be required to keep all business records pertaining to turnover for a period of up to 6 years. They are also encouraged to keep other business records for purposes of determining their tax liabilities in case they exceed the turnover threshold of K800,000.00.
9. Does a taxpayer who is under Turnover Tax have to submit provisional tax returns?
No. Provisional tax returns are only required for taxpayers whose gross sales/turnover is above K800,000.00
REGISTRATION AND OTHER PROCEDURES
Taxpayers will be required to notify the Commissioner General within 30 days of commencement of business. They will be registered and given a Taxpayer Identification Number (TPIN), Individual or Company Income Tax account number and a Pay As You Earn (PAYE) number where applicable.
A new taxpayer will be required to register as stated above and they will use their estimated turnover on the registration. It will be necessary to register for all eligible tax types at initial registration. Note that all tax matters starting from registration can be done online.
Cessation of business
If a taxpayer closes down his business for whatever reasons, such as business failure, bankruptcy, winding up, etc., they are advised to send a notification to the Commissioner General immediately after such cessation.
Change in Annual Turnover
Where a taxpayer whose turnover is below the threshold discovers that his annual turnover will exceed K800, 000.00 during the course of the year, he will notify the Commissioner General immediately. However, he shall continue to pay Turnover Tax till the end of that particular charge year and shall be assessed under the Income Tax System.
Any change from Turnover Tax to Income Tax and vice versa shall take effect only at the beginning of a charge year. No change will be effected during the course of the charge year.
The changeover can either be initiated by the Taxpayer or indeed by ZRA where the system detects the change in turnover.