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Seven simple steps to calculate provisional tax correctly

by , 15 August 2016
Seven simple steps to calculate provisional tax correctlyWith provisional tax, you estimate and pay your taxes in two payments. It's one payment every six months, instead of having to pay one big amount at the end of the tax year.

Your first payment is due by 31 August every year.

If SARS isn't happy with your estimate they will charge you with underestimation penalties. You'll pay these penalties on the amount SARS think your estimate should be. SARS can increase the amount you owe to an amount they considers reasonable.

And, if you submit your provisional tax return late, SARS will deem your return as 'nil' and impose a penalty for underestimation.

But you can use these seven steps to make sure you calculate your provisional tax correctly so you don't face these penalties.

Here are seven simple steps you can use to calculate your first provisional tax payment, using the SARS tax tables...

Calculate your estimated taxable income for the tax year.

This is your most important step.

Calculate the amount of tax you'll pay on this taxable income.

You can do this by referring to the SARS tax tables in Chapter P01 of the Practical Tax Loose Leaf Service.

Subtract the annual tax rebate from this amount.

Again, you should refer to the SARS tax tables in your handbook.

This will give you the total amount that you'll have to pay for the tax year.

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Here are seven simple steps you can use to calculate your first provisional tax payment continued…
As it's the first provisional tax return you're calculating, take away half of the total tax payable for the tax year, after which you'll be left with the amount due for the first period of the tax year.

Subtract any employee's tax deducted for the tax year.

Subtract the first six months for the first provisional tax return.

Subtract any allowable foreign tax credits for the tax year.
******* 31st August deadline *********
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With the help of tax experts who've helped countless clients make it through the provisional tax season in one piece, we've developed the e-Book that will finally answer your prayers!
Here's what the Provisional Tax 101 e-Book covers:

  1. What is provisional tax?
  2. Who is a provisional taxpayer?
  3. Test: Are you a provisional taxpayer?
  4. Checklist: Who DOESN'T have to pay provisional tax?
  5. Registered for provisional tax, but you don't actually qualify anymore? 
  6. Your provisional tax liability depends on whether you're a Tier 1 or a Tier 2 taxpayer 
  7. What to include in your calculation of provisional tax 
  8. The 10 documents you need to calculate your provisional tax 
  9. How to calculate your provisional tax in seven steps 
  10. How to complete your provisional tax return (IRP6) via eFiling
  11. How to correct errors – or check on the status of your return
  12. How to check if your account with SARS is paid up
  13. Steep penalties await the taxpayer who doesn't follow the rules 
  14. How to rescue yourself from interest charges if you've under-estimated your liability 
  15. Nine provisional tax questions answered

Written in simple English, Provisional Tax 101 gives you the step-by-step advice you need to estimate, calculate and pay over your provisional tax correctly  - yourself! You won't need to call an expensive consultant to do it for you.

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Here are seven simple steps you can use to calculate your first provisional tax payment continued…
Add any outstanding SARS penalties and interest on this amount.

This information will either already be on your provisional tax return, or you can get it from SARS and include it in your tax return.

For all the detailed calculations and examples for these eight steps, turn to chapter P01: Provisional Tax in your Practical Tax Loose Leaf. Don't have a copy yet, get yours now.
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