AI agents for business finance: what they can and can't do
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The short answer
SARS turnover tax applies to micro businesses with turnover of R2.3 million or less (from 1 April 2026) and replaces income tax, VAT and provisional tax with a tax of 0% to 3% on turnover. Many freelancers cannot use it: SARS excludes anyone earning more than 20% of receipts from professional services, and personal service providers. It suits low-cost, non-professional businesses best.
Turnover tax is SARS's simplified regime for micro businesses. Instead of income tax on profit, VAT and provisional tax, you pay a low rate on turnover. It sounds ideal for a freelancer, and for some it is. For many consultants with Nigerian clients it is not available at all, because of one rule about professional services. Here is how it works and how to tell which side of the line you are on.
How turnover tax works
According to SARS's turnover tax page, updated 22 September 2026, the regime is for micro businesses with annual turnover of R2.3 million or less; the threshold was raised in the 2026 Budget with effect from 1 April 2026. It replaces income tax, VAT, provisional tax, capital gains tax and dividends tax for those who qualify, although you may elect to stay registered for VAT. Sole proprietors, partnerships, close corporations, companies and co-operatives can all qualify if they meet the conditions.
| Taxable turnover (R) | Turnover tax (years ending 1 March 2026 to 28 February 2027) |
|---|---|
| 1 - 600,000 | 0% |
| 600,001 - 950,000 | 1% of the amount above 600,000 |
| 950,001 - 1,400,000 | R3,500 + 2% of the amount above 950,000 |
| 1,400,001 and above | R12,500 + 3% of the amount above 1,400,000 |
You make two interim payments, by the last business day of August and of February, using the TT02 payment advice, and file an annual TT03 return in the window from 1 July to 31 January. These figures are as at October 2026; check the SARS page for the year you are in.
The rule that excludes many freelancers
SARS's FAQ on who does not qualify lists, among other exclusions, any taxpayer where more than 20% of receipts are derived from rendering a professional service, and anyone who is a personal service provider or labour broker. The FAQ does not reproduce the list of professions, which sits in the legislation, so if your work is consulting, accounting, legal, medical, engineering, IT or similar, check the list in SARS's micro business guide or with a tax practitioner before you apply.
- Likely to fit: freelancers selling products, running a small trading or creative business, or offering services that are not on the professional services list.
- Likely to be excluded: consultants and professionals whose fees make up more than a fifth of receipts.
- Companies: also need a 28 February year end and only natural-person shareholders, among other conditions.
Worked examples (illustrative figures only)
A photographer in Cape Town has turnover of R800,000, mostly from Nigerian wedding clients, and qualifies. Turnover tax is 1% of R200,000 (the amount above R600,000) = R2,000 for the year.
A video editor with R1,200,000 of turnover who qualifies pays R3,500 + 2% of R250,000 = R3,500 + R5,000 = R8,500.
Compare that with ordinary income tax on profit: turnover tax ignores your expenses entirely, so it suits businesses with low costs relative to turnover. A business with heavy costs or a loss may pay more under turnover tax than under the normal system.
Does it suit income from Nigerian clients?
Foreign clients do not disqualify you; the tests are about turnover, the type of receipts and your structure. Three points matter for Nigerian clients specifically:
- Currency: turnover must still be measured in rand, so naira and dollar receipts need converting consistently.
- Withholding tax: a Nigerian company may deduct 10% withholding from professional fees to non-residents under the 2024 regulations. Under the normal system that Nigerian tax may be creditable against South African tax under the treaty; check with a practitioner how a credit works, if at all, against a tax charged on turnover rather than income.
- VAT: leaving the VAT system may or may not suit you if your clients are abroad; see our guide on VAT for freelancers with foreign clients.
Steps if you think you qualify
- Run SARS's quick test on its turnover tax pages.
- Check your receipts against the professional services rule.
- Compare the turnover tax figure with your expected income tax and VAT.
- Apply through the SARS channel shown on the turnover tax page.
- Diarise the August and February interim payments.
Leaving turnover tax
Turnover tax is a choice you can revisit. If your turnover is heading above R2.3 million, your work shifts towards professional services, or your costs grow so that tax on profit would be lower, check SARS's rules on exiting the regime before the next year starts, and plan for the return to income tax, provisional tax and possibly VAT.
Where Pryme fits
Whichever regime you use, you need one clear record of turnover in rand. A Pryme Business Account keeps client receipts in their currencies, invoicing gives you a numbered record of every sale, and the Finance agent prepares a turnover summary for you to review. See also our guide on registering to freelance in South Africa.
Questions people ask
What is the turnover tax threshold in South Africa?
R2.3 million of annual turnover, raised in the 2026 Budget with effect from 1 April 2026, according to SARS's turnover tax page.
Can a consultant use turnover tax?
Usually not. SARS excludes taxpayers who earn more than 20% of their receipts from rendering a professional service.
Do I still pay provisional tax on turnover tax?
No. Turnover tax replaces provisional tax, with two interim payments due by the last business day of August and February.
Is turnover tax cheaper than income tax?
Only if your costs are low relative to turnover. Turnover tax ignores expenses, so a business with high costs may pay more.
Sources
- SARS: Turnover Tax (updated 22 September 2026) · accessed Oct 2026
- SARS FAQ: Who does not qualify to be registered for Turnover Tax? · accessed Oct 2026
- Mondaq: An overview of the Nigerian Withholding Tax Regulations of 2024 · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.