Once you`ve understood how SITE and PAYE work, you can see how these taxes
fit in with provisional tax, if you happen to be a provisional taxpayer.
One of the reasons for introducing the system of provisional tax is to
ensure that your tax liability is paid in "instalments" to reduce the burden
on you of large amounts of tax in February, when you submit an annual tax
return.
If you are employed and still have a business of your own, alone or in
partnership (not a company or close corporation, as these are separate
taxpayers), and/or investments, that business, and the income from those
investments or trusts make you a provisional taxpayer, and you will be
obliged by law to register as such.
If you have a company or close corporation (not a business that you run in
your own name), you will not have to register as a provisional taxpayer
personally (as long as you don`t have investments from which you earn more
than R1 000 as taxable income, and as long as you are not the beneficiary of
a trust from which you earn taxable income of more than R1 000). But you
will have to register the company or close corporation as a taxpayer.
If the profits of your business plus your investment income and any income
you earn from trusts are likely to exceed R1 000 for the tax year, you have
to register personally as a provisional taxpayer.
If you are a senior citizen, more than 65 years old, earning no more than
R50 000 taxable income from employment and investment income, you will not
be classified as a provisional taxpayer. Once you have registered, the
Receiver will send you a provisional tax form every August and February to
fill in.
This is how to prepare your first provisional tax return:
1
Estimate your total taxable income (salary after deducting pension,
retirement contributions and, if you are over 65, medical expenses as well,
from your employment and profits from your business, if any, that you think
you will make for the full tax year;
2
Using the tax tables provided by the Receiver, depending on the level of
income that you earn, calculate the tax for 12 months, as if you worked the
full tax year;
3
Subtract the tax rebate that is provided to provide relief to taxpayers
(currently R3 515) from the tax that you have determined;
4
Divide the answer by two, because we want to calculate the tax for the
first six months of the tax year;
5
Then subtract the SITE and PAYE that you have paid from March to August
(the higher the employees` tax - SITE/PAYE - you paid, the lower your
provisional tax will be); and
6
If the employees` tax that you have paid so far is less than the total you
reached in point 4, you will have to pay the difference. But if your
SITE/PAYE is higher than the total in point 4, no refund is claimable.
When it comes to filling out the second form of the year:
1
You will be able to estimate fairly reliably how much your full taxable
income for the year to February will be;
2
Use the tax tables and calculate the tax for the full year;
3
Subtract the rebate;
4
Do not divide, because you want the tax for the full year;
5
Then subtract the employees` tax in point 5 above, as well as the
provisional tax that you paid in August, if any; and
6
If your employees` tax and the first provisional tax paid come to less
than your answer in point 4, sadly you will have to pay the difference.
Provisional individual taxpayers with taxable income of more than R50 000 a
year from all sources may pay a third "top-up" payment if the total
employees` tax paid for the full year, plus provisional tax, is less than
the total tax liability for the full year.