At GGD we offer a variety of year-end and provisional tax services for individuals and companies. We ensure compliance with both current and future legislation in a financial landscape where regulatory demands and submission dates often change. To help you make sense of your provisional tax obligations, here is a quick overview of what is required and how we can ensure your continued compliance in changing times.
Any person who receives income, other than a salary, is automatically a provisional taxpayer and all companies fall into the provisional tax system. Provisional tax is an advance payment on expected taxable income and provisional taxpayers are required to make estimates, in advance, of how much they expect to earn.
Provisional tax is paid twice a year. One payment is made six months into the year of assessment and one payment is made at the end of the assessment year. A third optional payment can be made after year-end if your first two submissions have not been accurate estimates and you want to avoid paying interest.
Provisional tax payment calculations can be based on an actual estimate of expected income or taxable income in the most recently assessed tax year, escalated by 8 percent a year if annual returns are in arrears by more than 18 months.
To avoid paying underestimation penalties when you submit your second return, you must ensure that your estimate of taxable income is within 90 percent of your actual income, if your income is less than R1 million. If you earn more than R 1 million, your estimate must be within 80 percent of your taxable income.
The next deadline for provisional tax filing is 31 January 2019. There are penalties for late submission and non-deductible interest is charged on late payment. If you are running your own business, making these estimates can be difficult and many people who make their own submissions, overestimate their income and then end up paying more tax than they need to and struggle to obtain a refund.
When making estimates, it is essential you do it as diligently and realistically as possible. If you have penalties imposed for underestimation, it can become a lot more difficult to have them remitted if you cannot show SARS that you have applied your mind properly and thoroughly when performing your supporting calculations.
When you are focussing on running your own business, it’s easy to miss a tax deadline and provisional taxpayers often forget to include other sources of income in their calculations. At GGD our taxation services include calculation, preparation and submission on all bi-annual provisional tax returns. To stay compliant through the various stages of your company’s growth, contact us today: