Do you know what provisional tax tier you fall under? Find out here...
As you know, qualifying as a provisional taxpayer will depend on whether or not you're an individual or a company.
If you're an individual, you'll qualify as a provisional taxpayer if you fall under certain criteria, while companies and closed corporations automatically qualify as provisional taxpayers.
Now, when it comes to all provisional taxpayers, there are what are called 'tiers'.
There are 2 of them, and they'll be briefly discussed below...
Tier 1 provisional taxpayer:
Tier 1 provisional taxpayers have a taxable income of less than R1 million.
If you're a tier 1 provisional taxpayer, you must make sure that your estimated tax due is within 90% of the actual final tax assessed by SARS.
In other words, you have 10% leeway (grace) on the final tax payable to SARS to be incorrect.
For example, you estimate that your final tax is around R95 000, and you pay this as provisional tax.
But upon assessment, it turns out that you earn more than that, let's say R100 000, you still fall within the 10% grace, and so you shouldn't be penalised for you under-estimation.
Continue reading to see the other tier…
Tier 2 provisional taxpayer:
You'll be paying a tax penalty of up to R4 000 to SARS on 28 February…
If you haven't submitted your provisional tax return by 28 February 2016, then SARS will add a R4 000 penalty to your tax bill…
Errors mean double penalties – one for the error, and one for not following the rules!
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Tier 2 provisional taxpayers have a taxable income of more than R1 million.
If you're a tier two provisional taxpayer, then you must make sure that your estimated tax due is within 80% of the actual tax assessed by
SARS. In other words, you'll have a 20% leeway, or grace, to be incorrect.
*Those were the two types of provisional tax tiers, namely tier 1 and tier 2. Make sure you know which tier you fall under.
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