If an individual has a business registered for turnover tax (ie sole proprietor), can they also belong to x1 other partnership ? Guide mentions can't be a partner in more than one partnership, and can't hold interest in a company (certain exceptions).
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The relevant law is found in paragraph 3 of the Sixth Schedule to the Income Tax Act. We quote the relevant parts for ease of reference here:
“3. A person does not qualify as a micro business for a year of assessment where—
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(g) in the case of a person that is a partner in a partnership during that year of assessment—
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any of the partners in that partnership is not a natural person;
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that person is a partner in more than one partnership at any time during that year of assessment; or
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the qualifying turnover of that partnership for that year of assessment exceeds the amount described in paragraph 2.”
Factually, in your request, the person is not involved in more than one partnership, but may be involved in more than one business. In the 2008 Explanatory Memorandum the following was stated:
“Where a person trades in different types of businesses, the total turnover of all business activities will be taken into account for purposes of determining the R1 million cap.” And also:
“However, it is important to look at the collective turnover of the partnership to ensure that only micro businesses access the turnover tax system.”
We submit that, if the turnover of the partnership is taken into account, the person may well exceed the R1 million threshold and will then not qualify to be registered as a micro business.