What is Provisional Tax in South Africa, Its Purpose and How Does it Work?
Provisional tax is a type of income tax that is levied on an individual, company or entity’s income during a specific period.
Provisional tax is calculated based on the individual’s or company’s actual income for the year by subtracting allowable expenses from their total earnings.
A provisional tax form will be generated and sent to the taxpayer in order to calculate their provisional tax rates.
How to Calculate Your Provisional Tax Rate in South Africa?
A provisional tax rate is the amount of tax that an individual will have to pay at the end of a financial year. It is calculated by multiplying your taxable income by the marginal tax rate and dividing it by an annual income threshold. The calculation is then multiplied by 100 to get your provisional tax rate.
You can calculate your provisional tax rate in South Africa with this formula:
Income x Marginal Tax Rate / Annual Income Threshold x 100
If you are paying provisional taxes in South Africa, then you are liable for the South African tax system. You’ll be required to pay provisional taxes when the tax office assesses your return during the year.
Who pays provisional tax in South Africa?
A provisional tax is a temporary tax which is payable by people expecting to be liable for income taxes. The tax has been withheld at the source and will be claimed in full later. It is a type of pre-payment that avoids the complexity of calculating tax in the event of an individual receiving income.
