Get your provisional tax calculations right by using these four documents
1. Income statement (or an extract of your accounting records showing your profit and loss)
Look at exactly what money your company made during the tax period. This is your total taxable income.
2. Invoices (for income and expenses)
This helps you check if you have any outstanding income or expenses you need to add into your taxable income.
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You'll be paying a tax penalty to SARS on 27 February…
If you haven't submitted your provisional tax return by 27 February 2015, then SARS will add a penalty to your tax bill…
Errors mean double penalties – one for the error, and one for not following the rules!
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3. A list of income items that you don't include in your taxable income (if applicable)
For example, if you get money from your insurance policy, this might be tax-exempt income.
4. A list of expense items you can't deduct (if applicable)
For example, if you did renovations to improve your business premises, you can't claim this expense as a deduction.
Once you've studied these four documents can you work out your provisional tax correctly with the right information.
But what do you do with this information to work out your provisional tax?
Here's how to use this information to work out your provisional tax
Step #1: Calculate your estimated taxable income for the tax year. This is the most important step so get it right by using the amounts from your income statement and invoices.
Step #2: Calculate the amount of tax you'll pay on this taxable income.
Step #3: Subtract the annual tax rebate from this. You can find this on SARS' tax tables on its website. This gives you the total tax you have to pay for the tax year. This is where you'll subtract your tax-exempt items.
Step #4: If you're calculating your first provisional tax return, subtract half of the total tax for the year. This will leave you with an amount due for the first period of the tax year.
Step #5: Minus any employees' tax you deducted for the tax year. Only do this for the first six months if you're completing the first provisional return of the tax year.
Step #6: Subtract any foreign tax credits you have for the tax year. Again, only do this for the first six months.
Step #7: Add any outstanding SARS penalties and interest on this amount. This should be on your provisional tax return, or you can get this information from SARS if it isn't.
Step #8: If you're calculating your second provisional tax return, subtract any provisional tax you paid for the first provisional tax period.
By using these four documents to check all the information in your provisional tax return, you can be sure it's correct.
To find out more about how to calculate your provisional tax correctly, check out Provisional Tax 101