At the moment, our tax experts are getting a lot of provisional tax questions. This doesn't come as a surprise. Provisional taxpayers are preparing to make their payments by 27 February. And it's clear they don't want to make mistakes.
One question that keeps coming up is about how to calculate the second provisional tax payment.
Read on to find out so you can work out your provisional tax correctly and avoid SARS penalties.
Work out your second provisional tax payment as follows
You must calculate your second provisional tax
liability by estimating your total taxable income for the tax year, says Anthea Scholtz, a tax partner at Deloitte.
'Calculate the tax liability on it (after applying tax rebates) and then deduct from this amount any employees' tax paid for the full year, any provisional tax paid to date for the tax year. And any foreign tax credits you may qualify for in respect of the full tax year.'
So basically, your calculation must include:
The total estimated tax for the full year;
Minus your employees' tax paid for the full year;
Minus any allowable foreign tax credits for the full year; and
Minus the amount paid for the first provisional tax period.
It's really that simple to work out your second provisional tax payment.
Make sure you stick to this method so you don't underestimate your tax liabilty and trigger a 200% penalty.
Now that you know how to work out your second provisional tax payment, remember the following points so you can pay without any hassles…
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Use these three points to pay provisional tax with ease
1. Use an IRP6 to pay provisional tax and do everything online via eFiling.
In this article, we explain that
SARS no longer issues IRP6 returns to provisional taxpayers. You have to request the return via the following channels:
2. To submit an accurate IRP6 to SARS, check that it contains accurate information before you complete it.
Check your year of assessment, payment period and your historical details.
The SARS Contact Centre;
The SARS branch office; or
The Taxpayer Service Centre.
And remember, SARS will charge you penalties if your return is incorrect.
You'll need four documents to calculate provisional tax for your company. This includes:
An Income statement (or an extract of your accounting records indicating profit/loss);
Invoices (for income and expenses);
A list of income items that aren't taxable (if applicable); and
A list of expense items that aren't deductible (if applicable).
If you're an individual, you can find the ten documents to use here.
Now that you know how to work out your second provisional tax payment, don't miss the 27 February deadline.
If you're still unsure of how to calculate provisional tax, check out Provisional Tax 101.
It has everything you need to know. Or send your questions to our experts at www.accountingandtaxclub.co.za.