In this summary we will look at basic theory on this topic as well as detailed calculations on how to calculate the 1st - 3rd provisional tax payments and any tax penalties that could arrise.
PROVISIONAL TAX 4th Schedule in the ITA.
Time Line
1st Provisional tax payment (compulsory). Due 6months after Y-e.
2nd Provisional tax payment (compulsory). Due 12months after Y-e.
3rd Provisional tax payment (Optional). Due 19months after Y-e…only if 28 Feb Y-e
Due 18months after Y-e…other Y-e date.
- To reduce interest*
- NO penalty on 3rd if payment is late or underestimate
2nd 6 months E’es tax. 2nd 6 months E’es tax
1 Sep 2021. 28 Feb 2022 1 Sep 2022. 28 Feb 2023
1 Mar 2021. 31 Aug 2021 1 Mar 2022. 31 Aug 2022. 1 Mar 2023
1st 6 months E’es tax. 1st 6 months E’es tax
Theory:
- ESTIMATE = WHAT YOU THINK YOUR TAXABLE INCOME WILL BE.
(on i.e 31 Aug 2021, and 28 Feb 2022)
- BASIC AMOUNT = WHAT THE COMMISSIONER THINK YOUR TAXABLE INCOME WILL
BE FOR THE LATEST PRECEDING YEAR OF ASSESSMENT (LPYOA) LESS CGT, RLB,
RLWB, SB and LOSS OF OFFICE.
- NOTICE OF ASSESSMENT = SARS THAT GIVES YOU FEEDBACK ON YOUR TAX CALCS >
TO TELL YOU IF YOU OVER OR UNDER PAID FOR THE PREVIOUS YOA.
When to include or exclude capital gains tax:
1st Provisional payment:
- Basic amount: exclude CGT gain in prior and current year.
- Estimated taxable income: include CGT gain in current year.
nd
2 Provisional payment:
- Basic amount: exclude CGT gain in prior and current year.
- Estimated taxable income: include CGT gain in current year.
rd
3 Provisional payment:
- Actual Taxable Income: include CGT gain in current year.
, STEPS TO CALC BASIC AMOUNT:
STEP 1: >= 14 Days Rule.
- Notice of Previous year’s assessment
- Received >= 14 Days before
. - Submission of current estimate?
If YES: BASIC AMOUNT = PREVIOUS year’s TI — CGT (if any)
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STEP 2: > 18 Months Rule.
IF NO -> - Is end of LPYOA par19(1)(d)
BASIC AMOUNT - > 18months before
. = - the current estimate?
TI in OLDER YOA
IF NO: Then no 8% escalation of inflation necessary
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STEP 3: 8% Escalation Rule.
IF YES: - (for every year back -> 8% escalation)
#therefore . - 8% x years back
> 18 months . - Basic Amount x 1.24% -> (i.e: 3 years back = 24%)
= Basic Amount to be used in current year.
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