Turnover tax is not the same as Value Added Tax (VAT), although both are indirect taxes on consumption. While VAT is applied only to the value added at each stage of production (allowing input tax deductions), turnover tax is typically a flat-rate tax on total gross sales without deductions, often leading to cascading or double taxation.
A turnover tax is similar to VAT, with the difference that it taxes intermediate and possibly capital goods. It is an indirect tax, typically on an ad valorem basis, applicable to a production process or stage.
What is the main difference between Turnover Tax (TOT) and Value Added Tax (VAT) in Kenya? TOT is a flat 1% tax on a business's gross monthly turnover, while VAT is a 16% tax (or 8% for specific goods) on the value added at each stage of production and distribution.
This tax is typically calculated as a percentage of the total transaction value when securities, such as stocks and bonds, are bought or sold. The purpose of this tax is to generate revenue for the government and regulate trading activities in the financial markets.
You don't — the U.S. doesn't have VAT. Sales tax is calculated instead, based on the rules and rates in effect at the buyer's location, which can differ from one jurisdiction to another.
VAT is calculated based on your taxable turnover, not your profit. That means it applies to the total value of your VATable sales, regardless of your expenses or how much profit you actually make. Profit is relevant for income or Corporation Tax, but VAT is purely based on the value of goods or services sold.
Those turnover taxes are mostly levied under a VAT type of tax system and, in a decreasing number of cases, as a multi or single-stage (retail) sales tax. This article presents an overview of those general turnover taxes and the tax rates applicable on 1 January 2025.
Turnover is calculated after VAT is deducted from income. VAT is not considered part of your business income. In order to get an accurate picture of the turnover of your business you need to exclude VAT from your sales total. Your gross profit/turnover does not include other tax liabilities.
Turnover tax is reserved for micro businesses with a “qualifying turnover” of less than R 1 million for the financial year. “Qualifying turnover” is the total amount received by a business for the year of assessment from carrying on business activities.
(1)A person whose income from business does not exceed or is not expected to exceed five million shillings per annum shall be required to apply for turnover tax registration in the prescribed form.
Value-added tax
You must register your business for VAT if the total value of your goods and services in any consecutive 12-month period exceeds or is likely to exceed R1 million.
VAT RATES. There are two (2) tax rates:- 16% (General rate) – this rate applies to all taxable goods and taxable services other than zero-rated supplies. 0% (Zero-rate) – this rate applies to specific supplies listed in the Second Schedule to the VAT Act, 2013.
You can choose to register for VAT if your turnover is less than £90,000 ('voluntary registration'). You must pay HM Revenue and Customs ( HMRC ) any VAT you owe from the date they register you. You do not have to register if you only sell VAT exempt or 'out of scope' goods and services.
The tax under section 44AD of the Income Tax Act is calculated at 8% of the total gross turnover (or 6% for digital transactions) provided that the annual turnover is below Rs. 2 crores (Rs. 3 crores if 95% of receipts are through online modes).
Turnover Tax (TOT) is a tax charged on gross sales of a business as per Sec. 12 (c) of the Income Tax Act. The tax is payable by resident persons whose gross turnover is more than Ksh 1,000,000 but less than Ksh 50,000,000 in any given year.
Basically, it's all the money that comes into your business before any expenses and operating costs are deducted. It's not to be confused with profit which measures your overall earnings and is reached by subtracting your total expenses from your total sales.
The VAT threshold is the volume of annual turnover at which businesses are required to register for value-added tax (VAT), currently charged at 20 percent. Since April 2024, the UK VAT registration threshold has been £90,000. VAT thresholds for previous years are as follows: 2014–2015 – £81,000.
Sometimes a client pays an invoice only partially or not at all. In that case, the entrepreneur has paid too much turnover tax, because the tax was calculated on an amount that was never fully received. The law allows these excess payments to be reclaimed.
Standard VAT: It applies to most goods and services at a uniform rate, which makes the administration process simpler. Differential VAT: It uses different rates for domestic and imported goods and services. Small Business VAT: It uses simplified VAT systems that have lower reporting requirements for smaller businesses.
VAT: A multi-stage tax applied at every step of the supply chain, from production to final sale. However, businesses claim credits for VAT they've already paid, so the tax ultimately falls on the consumer. U.S. Sales Tax: A single-stage tax applied only at the final point of sale to the consumer.
The turnover of a business should be easy to determine with accurate records: find the total sales amount for a given period. To determine the VAT taxable turnover, you would then need to subtract any amounts that can be excluded (aren't subject to VAT).