For a lot of us, when it comes to the topic of TAX, the subject goes right over our head.
But you know how it goes, when you find someone to help you out they almost become a demigod of your business religion.
So we asked Galbraith Rushby, 2ov’s first choice when it comes to business tax admin, accounting and bookkeeping, for a breakdown on what’s happening on Wednesday for our readers and they gave us this:
Provisional tax is not a separate type of tax but pre-payments on Income Tax for a specific tax year. The aim of provisional tax payments is to help taxpayers to fulfil their tax responsibilities by spreading tax payments over a tax year. After SARS has assessed a taxpayer for income tax, the provisional tax payments will be set off against the final liability for income tax for a specific tax year.
There are two compulsory provisional tax payments in respect of a year of assessment based on estimated taxable income. There is also a third “voluntary top-up” or “additional” provisional payment, unlike the first and second payments the third period payment is based on the actual taxable income for the year.
The purpose of the third voluntary payment of provisional tax is to avoid interest being charged as a result from previous estimate shortfalls. This situation occurs where the provisional taxpayer’s actual taxable income exceeds the estimates used to calculate his or her first and second provisional tax payments. In order to calculate the third payment, the taxpayer’s normal tax liability is based on his actual taxable income for the period of assessment. This amount is reduced with the first two provisional tax payments as well as employee’s tax and foreign taxes (that qualifies or a section 6quat-rebate) paid during the assessment period.
Because this payment is not a compulsory payment and there is therefore, no provision for penalties if the payment is late or is underestimated.
This payment only applies to:
The third payment must be made within seven months after the taxpayer’s year of assessment has ended (if it is on 28 or 29 February). If the person’s tax period falls on any other day, he has to make payment within the first six months that follows.
Interest will start to accumulate after the due date for the third voluntary payment expired.
If you for any reason believe that you will be due a payment to SARS upon final assessment of your 2015 Income Tax return, we ask that you contact either Michael or Lizette to discuss.
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