employees and provisional Tax Flashcards
what is the formula to calculate Provisional Tax payments
First payment
- estimated Taxable income must be basic amount
* Basic amount is the taxable income less captial gains from the last assessment you received (subject to inflationary rates if older than 18 months from payment date for every part 12 months)
- use tax tables
- divide by 2
- Less PAYE
- Less normal and medical rebates
- gives you the payment
Second Payment
- estimated Taxable income
- Apply Tax tables
- less PAYE and both rebates
- Less the first payment
- second payment
- TIP: if your taxable income is more than 1 million the estimate must be at least 80% of actual taxable income, else you’ll get a penalty, if it’s less an a mil, the estimate must be at least 90% and cannot be less than the basic amount
Third payment
- Workout Actual Tax and add the shortfall
- Work out what the second payment should have been and if there is a penalty to pay
- add together
- that is the third payment
Who should and shouldn’t pay Provisional Tax?
Provisional Tax
section 1 of the 4th sch of the ITA
- the people who should pay provisional tax are defined as provisional taxpayers and the act defines them as below
- a provisional taxpayer is someone who derives remuneration from an employer or derive income that isnt remunerations
- but shall exlcude any natural person who doesnt carry on a trade and their total taxable income in terms of interest, dividends, foreign dividends and rental from letting of fixed property, doesnt exceed 30 000 in that YOA
- there more stuff said there as well
Provisional Tax
What is the formula to calculate employees Tax
Employees Tax on recurring amounts
1. Remuneration by recurring amounts
2. Less deductions
3. multiply by 12 (annual Equivalent of recurring amount)
4. apply the tax tables
5. less medical and normal rebates
6. Divide by 12
7. Gives you Tax on recurring amounts
Employees Tax on once off amounts
8. Add the once off amounts
9. Add the annual equivalent of recurring amount
10. Tax them on the relevant tables (could be a severance benefit table)
11. Less the normal and medical rebates
12. Gives you the total annual tax
13. Less tax on annual equivalent
14. Gives you employees tax on once off amount
Is variable Remuneration included in the Employees Remuneration amount?
Section idk
Only to the extent that it has been paid to the employee
What is the point of Employees Tax and Provisisonal Tax?
- Provisional Tax exists because not every item falls into remuneration, that’s why the amount you pay for it has PAYE deducted off of it
- Employees Tax exists so that people don’t have a massive amount of tax to pay at the end of the year
Who should and shouldn’t pay employees tax?
Employees Tax
Section 1 of the 4th sch of ITA
- Every employer who pays or becomes liable to pay remuneration to an employee shall deduct or withhold employees’ tax from the remuneration paid or payable to the employee in accordance with this Schedule.
- an employer is someone who is paying or is liable to pay remuneration (inlcludes adminstrator of funds(pensions), includes the state, includes the person acting in fiduciary duty/trustee and lastly it excludes anyone who is not a principle ( i dont know what that is)
- an employee is
* any person (not just natural) that receives any remuneration
* renders service to or on behalf of a labour broker
* declared to be an employee by the minister of finance
* personal service provider (which is)
> any company or trust where the service provided to the Client is personally rendered by a connected person of the company or trust or by the company/trust AND
> such person would be regarded as an employee if direct to client OR
> where such duties are performed mainly on a premises, they are subject to the control or supervision of the client as to their duties OR
> more than 80% of the income is from that client
> UNLESS, throughout the year of assessment, they had 3 more more full time employees who arent shareholders or connected persons
- remuneration means any salary, leave pay, bonus, commission, allowance, perquisite, or other payment or benefit received by an employee from an employer in respect of or in connection with the employment, whether paid or given in money or otherwise
- anyone outside this bracket should not
Employees Tax
What is the penalty if someone fails to withhold tax for employees tax purposes?
para 6(1) of the 4th sch of ITA
- SARS may levy a penalty of 10% on the outstanding amount
What shall does the second payment of provisional tax need to be?
Look on the OneNote notes that you have
When are the provisional tax payment dates?
- If your year of assessment ends on 28 February then
- 30 September first payment
- 28 February second payment
- 31 August extra third payment If needed
- the first payment date get pushed back a month(6 months from start of year of assesment and not 7) if the year of assessment is not ending on 28 Feb
What is a quick way to work out if you have a provisional tax understatement penalty? And how much it is?
- If the total provisional tax you have paid at the end of the year amounts to less than 80% of your taxable Income. Then you have a penalty.
- You can determine the amount but multiplying the understatement amount by 20%
