Simplified tax for small businesses - The presumptive tax |25 February 2013

We want to make it easier and cheaper for businesses to comply with their obligations as taxpayers with a system that reduces compliance burden in terms of time, money and effort required.
 
With this in mind, effective January 1, 2013, a presumptive tax regime has been introduced for small businesses with an annual turnover that is below R1 million.

 This includes sole traders, partnerships and companies not registered for Vat (Value Added Tax).

While the presumptive tax removes all obligations related to Business Tax and Vat, those related to employment (employers’ obligations under the Income and non-monetary benefits tax) still remain. 

What is the rate of the presumptive tax?

The presumptive tax rate is 1.5% of the business’ annual turnover.
For example:

• If a business makes an annual turnover of R750,000, the tax payable will be R11,250

(750,000 x 1.5% = 11,250).

• If a business makes an annual turnover of R1 million, the tax payable will be R15,000

(1,000,000 x 1.5% = 15,000)

How to determine the annual turnover of the business?
The annual turnover is determined on a cash basis. In other words on gross receipts derived from the activity.  In Seychelles, the presumptive tax is based on the business annual turnover of the previous year. Example: the 2013 turnover is the tax base of the presumptive tax 2014.

What are the benefits of the presumptive tax?
One of the main benefits of presumptive tax is that it reduces the taxpayer compliance burden.
• Easy to fill - The presumptive tax return is a simplified one-page return compared to the four-page Business Tax Return that other businesses have to submit along with their Profit & Loss Account and certified accounts if a company;
• Only one return - Small businesses are only required to file one single return per year. Due date is March 31;
• Only one payment - Small businesses are only required to make one payment per year, when they file their presumptive tax return. Due day is March 31;
• Cheaper - No certification of account is required, unless the small business is a company;
• Simpler - The record keeping requirements are less burdensome for small businesses. Presumptive tax regime is based on cash accounting rules; 
• Small businesses (other than the ones listed below) no longer have to pay the Pay As You Go (PAYG) - Deduction At Source*, Business tax as well as Vat.

* Prior to January 1, 2013 (before the introduction of the presumptive tax) most of the small businesses (other than the ones listed below) were liable to the Pay As You Go (PAYG) - Deduction At Source (DAS) system, where they had to use the DAS book each time they received a payment for their service. The recipient of these services had to deduct 5% from the payment of the service. Under the presumptive tax regime this is no longer necessary, except for the following categories of small businesses:
• Building contractor
• Maintenance contractors
• Mechanics (either motor vehicle, marine or refrigeration)
• Hirers or operators of plant and equipment including sea vessels, motor vehicle for transportation of goods or for towing
• Hirers of public omnibus.

When is the first presumptive tax payable and the presumptive tax return due?
The first presumptive tax is payable on or before March 31, 2014. This is also the date on which the presumptive tax return has to be filed.

Is it compulsory for all small businesses to pay the presumptive tax?
The presumptive tax is applicable for all businesses regardless of their activity and their status; provided their annual turnover is not above R1 million and that they are not registered for Vat.
However, upon prior authorisation from the Revenue Commissioner if duly motivated, small businesses can opt to remain in the former business tax system whereby they will:
• be liable to the normal rate of tax of 15% on their taxable income of between R150,000 to R1 million;
• need to pay PAYG (Instalment) on a monthly basis based on forecasted revenue each year
• have to lodge a self assessed business tax return by March 31 of each year together with Profit & Loss Account
• have their accounts audited if a company
• need to attach any amount of business tax due together with the business tax return when being lodged.

For more information
Please do not hesitate to contact our Advisory Centre on 4293741/42, Manager Provision of Advice on 4294937, Manager Registry on 4293726, Manager Returns and Payment Processing on 4294972 or Mrs Woodcock on 4293724.

Submitted by the Seychelles Revenue Commission