Provisional Tax: Time is running out
JOHANNESBURG - Provisional taxpayers preparing for the holiday season, thinking they still have lots of time to get their tax returns in, choosing to put the February 28 2010 submission date at the back of their minds, might be in for a shock.
You will have to submit two returns: the 2009 annual income tax return (if you have not already done so) and the second 2010 provisional tax return* by February 28 2010.
The February deadline for 2009 tax returns does not apply to all provisional taxpayers. It is only for those who are in good standing with the South African Revenue Service (Sars) (ie, have no outstanding returns with Sars except for the current 2009 return) and e-file their tax returns.
Those who leave filing of the income tax return until February 28, and owe Sars money will have to make payment within seven days of assessment.
When preparing your second 2010 provisional tax returns, you'll have to be extremely cautious that you make an accurate estimate of your taxable income in order to avoid Sars's new stringent penalties.
To avoid penalties taxpayers who have a taxable income below R1m will have to estimate the final amount owed to Sars to 90% of actual taxable income unless you choose the basic amount (the basic amount if older than a year will be escalated by 8% pa). Those with taxable income of R1m or more will have to estimate the amount owed to Sars to 80% of the final tax due on full taxable income, including capital gains. A task that will require a significant amount of time and prove incredibly challenging to accountants, tax practitioners and those doing their own returns, as highlighted by MoneywebTax.co.za in Provisional Tax: The nightmare has ended for some and Provisional tax: a tax nightmare.
Estimating the figure, a process that only a couple of years ago took three days, could now easily take tax practitioners 12, says Colin Wolfsohn, a member of the Saica National Tax Committee (which represents over 27 000 members from small to large businesses).
The difficulty lies in the fact that provisional taxpayers need to make a full estimate of their current year's taxable income. For this you'll need to calculate your passive (interest on investments) and rental income, thus you will need to get certificates from your financial institution, which could prove difficult, as these are only issued after year end. You will also have to tally up all your medical expenses for the current year.
In the case of businesses, giving a full estimate of their current year's taxable income is even harder. They will have to take their management accounts (if available) and estimate their turnover and expenditure for the whole financial year. They will also have to take account of estimated stock levels, debtors and creditors as well.
These are all estimates as this exercise needs to be done before the year end.
Another problem with submitting your form at the last minute is that you may experience problems with e-filing, should the experience of the final week of individual taxpayers' filing season repeat itself. The e-filing site was continuously down during that week. One taxpayer told MoneywebTax.co.za that every time he logged into e-filing it came up with the following message "User not logged in". Also queues at Sars's offices were cumbersome and long. Wolfsohn mentioned that 500 people queued outside Sars's Cape Town office at 6.00am on November 20, the final day to file. Plus you will be competing with a deadline for two taxes.
The choice is yours, act now or face Sars's new stringent penalties.
Write to Monique Vanek: monique@moneywebtax.co.za
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*Tip for provisional taxpayers: When it comes to the provisional returns, these are usually pre-populated with the taxpayer's last assessed taxable income and reflect the PAYE deducted by the taxpayer's employer for the previous year assessed, therefore you will need to insert the correct amount of PAYE.
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Comments
If I have annual income over R1m and sell an asset on 28 Feb which makes a capital gain, that gain has to be included in my second provisional tax return - due the same day - or I mayface penalties.
This is of course administratively . .more
by Catch22 on November 30 2009, 09:33
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Monique,
Can you please post a comment briefly explaining how this works. Which period of earnings must be estimated Feb 2010 filing deadline. Is is normally for 6 month periods (running from when to when)?
by Rich on November 30 2009, 15:22
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Catch 22 - if you sell the asset on 28 Feb, it depends when you get paid for it. If after 28 Feb, it goes into the next tax year.
On the other hand, if you knew of the amount of capital gain beforehand, you could include it in your 28 Feb return
by Hugh on November 30 2009, 16:53
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It's not too bad if you are earning a salary because you can have an accuracy of 90% and still make a reasonable capital gain/interest, but as a pensioner with no fixed income we are penalised from R1!!! Very, very unfair- especially as it is all guess . .more
by Pensioner on December 01 2009, 13:45
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If your income is up to R1 million, you can use your basic amount, which SARS used to give to you and will probably again. In short, nothing has changed for you. The basic amount/90% rule, which has been in place or decades, remains.
If your . .more
by Egg Spur T on December 01 2009, 23:25
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on a property when Jozi municipality summonses for amounts outstanding years after the sale with clearance certificate. This is a dark kafkaesque country!
by Shirley Armstrong on December 02 2009, 07:57
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