Provisional Tax

A provisional taxpayer includes any person who earns income other than remuneration, such as rental income or business profits.

• TRUE

• FALSE

Companies are automatically classified as provisional taxpayers.

• TRUE

• FALSE

A 25 year-old taxpayer estimates their taxable income for the 2024 tax year at R800,000. Calculate the first provisional tax payment due on 31 August 2024

• R228 677

• R211 442

• R105 721

A company with an actual taxable income of R1,200,000 made a first provisional payment and second provisional payment of R150 000 and R180 000. Does the company have to make a 3rd top-up payment to avoid penalties?

• YES

• NO

Answer explanation

Actual normal tax liability : ( 1 200 000 x 27%)

= R324 000

LESS: Provisional payments made

(150 000 + 180 000) = R330 000

The basic amount for the first provisional tax payment is based on:

• Estimated / Budgeted income for the year. Including taxable capital gains.

• Taxable income from the latest preceding year of assessment, including capital gains and retirement lump sums.

• Income reasonably expected in terms of a contract

• Taxable income from the latest preceding year of assessment, excluding capital gains and retirement lump sums.

If more than 18 months have passed since the end of the latest preceding year of assessment, the basic amount must be increased by 8% for each year that has elapsed.

• TRUE

• FALSE

The second provisional payment estimate may be less than the basic amount.

• FALSE

• TRUE

• TRUE, if the circumstances of the case are justified

• FALSE, only the 1st provisional payment may be less than the basic amount

If the Notice of assessment (NOA) for the prior year is received less than 14 days before the first provisional payment is due, what should the taxpayer do?

• Use the NOA for the latest preceding year of assessment (LPYOA)

• Use the NOA for the second latest preceding year of assessment (LPYOA).

• Use an estimate of the current year’s taxable income.

• Submit a Nil return

Mr. D's (46 years) latest Notice of assessment (NOA) for the 2021 year of assessment was issued on 15 August 2022.

• The 2022 year of assessment’s NOA was issued on 25 August 2022.

Scenario:

The taxpayer is required to determine their taxable income for the first provisional tax payment for 2023. Their taxable income from the 2021 year was R800,000, and their taxable income from the 2022 year was R850,000.

What is his basic amount for the 2023 year of assessment?

• R918 000

• R864 000

• R850 000

• R800 000

Mrs White (56 years) estimated her taxable income for the 2024 year at R950,000 but her actual taxable income for the year was R1,200,000. She made a first and second provisional tax payment of R150,000 and R120 000 respectively.

Calculate any underestimate penalties payable if any:

• R1 177

• R5 884

• R24 304

• R14 464

Answer explanation

Actual taxable income: R 1 200 000

Tier 2, Test if last and final estimate of R950 000

is less than 80% of R1 200 000

R950 000 < (R 1 200 000 x 80% = R960 000)

Underestimate penalty:

= (960 000 - 857 900) x 41% + 251 258

=R293 119 - R17 235 - 150 000 - 120 000

=R 5 884 x 20%

= R1 117