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Summary PROVISIONAL TAX FOR TAX399
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PROVISIONAL TAX FOR TAX399
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PROVISIONAL TAX1st pmt 2nd pmt 3rd pmt (top-up)
01/03/2012 6 months 31/08/2012 6 months 28/02/2013 7 months 30/09/2013
Introduction
Not a separate tax
Mere prepayment of normal tax in advance
Certain taxpayers may be liable for both employees’ tax and provisional tax.
2 ways of prepayment
o Employees tax, which is a tax on ‘remuneration’
o Provisional tax, which is a tax on other income:
Passive income including rent, interest, dividends and business income
All paragraphs – 4th Schedule
How does Provisional Tax work?
o Compulsory payments
After 1st 6 months of year of assessment; and
At end of year of assessment
o 3 voluntary payment
rd
Within 6/7 months after year of assessment (taxpayer’s choice to cover
final liability)
If taxpayer has a February year end, then 7 months after year
end
If taxpayer does not have a Feb year end, then 6 months after
year end
FIRST PAYMENT
Within 1st 6 months of year of assessment for an individual: 31 Aug 2013
Based on estimate of taxable income
o If the estimate < BASIC AMOUNT, then use the basic amount (minimum
amount- only applies to first payment) [par 19 (1) (c)]
o If the estimate > basic amount Choice between basic amount and estimate
(the taxpayer will usually choose the basic amount because they prefer paying
as little provisional tax as possible)
Calculation of ‘First Payment’:
o Calculate the normal tax* on estimate/ basic amount after deducting:
Primary/secondary/tertiary rebates
Medical credit* (only if < 65 years old and a member of medical aid)
o Divide answer by 2 (only half year payment)
o Deduct employee’s tax for 1st 6 months
o = first payment
BASIC AMOUNT [par 19]
What is the Basic Amount?
o Taxable income as per latest preceding year of assessment (so for the 2014
year of assessment, it would be the 2013 year of assessment)
o LESS: Taxable capital gains (we deduct taxable capital gains because they are
variable and the asset is not sold every year)
Latest preceding year of assessment
, o Year of assessment already ASSESSED by SARS; and
o Assessment not issued less than 14 days prior to estimate
o Class example:
01/03/2013 20/08/2013 31/08/2013
Can’t use because it was issued less than 14 days prior to estimate
If 2013 assessment issued less than 14 days prior to estimate:
o Use assessment prior to 2013 assessment (hence 2012)
8% adjustment required when:
o Estimate > 18 months after the end of latest preceding year of assessment; and
o Period ends >1 year after the end of latest preceding year of assessment
o Class example:
31 Aug 2013 (first payment) 28 Feb 2014 (2nd payment)
2013 was not assessed, therefore can’t use
2012 was assessed, therefore can use
Assume the estimate was made on 28 Feb 2012, then it is greater than 18
months after the end of the preceding year of assessment and the period ends
greater than 1 year after the end of the latest preceding year of assessment.
Therefore, the following adjustment would have to be made:
BA 2012 - 2013 - 2014
80% 80% = BA
o Last year’s example:
The basic amount has to be adjusted by 8% if not the immediate prior year of
assessment is used.
NB!! The basic amount should be increased by 8% a year if the basic amount
available is for a year of assessment that ended more than a year before the
provisional estimate is due (proviso to par 19 (1) (d)). Thus, if the 2011 year
of assessment, it can be used to estimate the taxable income for both the 1st
and the 2nd provisional payments for 2012 without any adjustment. Therefore,
if the taxable income assessed for the 2011 year of assessment is, for example
R380 000, this amount can be used as a basic amount to calculate the 1st and
2nd provisional tax payments without adjustment. If the 2013 provisional tax
payment needs to be calculated and only the 2011’s year of assessment is
available (R380 000), the taxpayer will have to increase the amount by 8% per
year. The R380 000 needs to be increased by 8% for 2 years, thus by 16%:
R380 000 x 1.16% = R440 800.
SECOND PAYMENT
Last day of year of assessment individual: 28 Feb 2014 [No requirement but the
structure below should be followed to avoid a penalty because if the payment is too
small, then SARS will levy an under-statement penalty]
Based on estimate of taxable income
o Estimate < BASIC AMOUNT choose basic amount to avoid penalties
o Estimate > basic amount
Taxable income ≤ R1million: Choice between estimate and BA
Taxable income > R1 million: Use estimate
Calculation of ‘second payment’:
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