Filing for provisional tax in South Africa can be a daunting task for many business owners and especially individuals [I am pointing a sharp and judgemental finger at myself], but it is a necessary process that should not be overlooked. In this blog post, we will discuss the basics of filing for provisional tax, its benefits, and some tips to make the process easier.
Before I get into this post, I just want to let you know that I came across an article where the HM Revenue Customs (HMRC) – which is a government department in the UK which is responsible for collecting taxes has been monitoring the influencer industry and has now targeted more than 2000 influencers who have been “dodging” taxes. [Source: https://www.chroniclelive.co.uk/news/cost-of-living/hmrc-targets-more-4000-social-26355739 ]
Now I’m not saying as a South African influencer or model or side hustler that you should panic, I’m just saying that maybe it is time for you to start taking your law abiding citizen a*s seriously and be on the safe side by taking care of your provisional tax. I mean we know that at some point the South African government will start targeting influencers in the country as this is a fast booming industry that has transcended borders. In this blog I will be exploring ways in which you can file your taxes and the benefits that come with the process.
What is Provisional Tax?
Provisional tax is a tax system that requires taxpayers to pay their income tax in advance, instead of waiting until the end of the tax year to pay their full tax liability. It is a system that is designed to help taxpayers avoid the burden of having to pay their taxes in one lump sum at the end of the year.
Provisional tax applies to individuals, companies, and trusts that earn income other than a salary or wage. This includes income from rental properties, freelance work, consulting fees, and any other income that is not taxed through PAYE (Pay As You Earn). If you earn more than R30,000 per year from these sources, you are required to register for provisional tax.
The process of filing for provisional tax can be broken down into several steps:
Step 1: Register for Provisional Tax: The first step is to register for provisional tax with SARS (South African Revenue Service). You can do this online or by visiting your nearest SARS branch. You will need to provide your personal information, tax reference number, and information about your sources of income.
Step 2: Estimate Your Taxable Income: The next step is to estimate your taxable income for the current tax year. This involves calculating your total income from all sources and deducting any allowable deductions, such as business expenses, to arrive at your taxable income.
Step 3: Calculate Your Provisional Tax: Once you have estimated your taxable income, you can use the SARS online tax calculator to calculate your provisional tax liability. This will give you an estimate of how much you will need to pay in advance for the current tax year.
Step 4: Make Your Payment: The final step is to make your provisional tax payment. You can do this online, by bank transfer, or by visiting your nearest SARS branch. It is important to make your payment on time to avoid penalties and interest charges.
Of course for someone who hates this entire process, you can always ask someone to do it on your behalf. My hate for tax stress goes way back to high school where I hated math coupled with the fact that I am not so tech savvy and finance jargon is a lot to take in. I recently partnered with Wright Business Partners to help you deal with this tax stress before the Provisional Tax season is over on the 28th of February and you can let them take the reigns for you.
Wright Business Partners is based in Kempton Park on the East Rand but services clients as far as Cape Town. Apart from the services mentioned, they provide clients with all the convenience of assisting them in most aspects that may be required, whether it be a new company or an established business. This includes all relevant South African Revenue Service registrations, BEE certificates, Employment Equity completions, Workman’s compensation returns and tax clearance certificates, and tax returns.
Benefits of Filing for Provisional Tax
Filing for provisional tax offers several benefits, including:
- Cash Flow Management: Provisional tax allows you to spread your tax payments over the course of the year, which can help with cash flow management. By paying in advance, you can avoid having to make a large lump sum payment at the end of the year.
- Avoid Penalties and Interest Charges: Filing for provisional tax and making your payments on time can help you avoid penalties and interest charges. SARS imposes penalties and interest charges for late or underpayment of taxes, so it is important to stay up to date with your payments.
- Reduced Stress: Filing for provisional tax can reduce stress and anxiety associated with tax season. By paying in advance, you can avoid the last-minute rush to file your tax return and make your payment.
Tips for Filing for Provisional Tax
- Keep Accurate Records: Keeping accurate records of your income and expenses throughout the year can make the process of estimating your taxable income much easier. Use accounting software or hire a bookkeeper to help you stay on top of your finances.
- Don’t Overestimate Your Income: When estimating your taxable income, it is important not to overestimate. This can lead to paying more in provisional tax than you need to, which can hurt your cash flow.
- Consult a Tax Professional: If you are unsure about what documents you need to submit or the process entirely, you can either consult with the South African Revenue services (SARS) or hire a consultant on an affordable rate like I did. Wright Business Partners honestly have been taking a big lead in making sure that my taxes are in order and up to date. I just hope that I have some credit owed to me so I can make it rain in summer.
In the end, good things actually happen because as I write this, Wright Business Partners just notified me that I will be receiving a tax refund from SARS of R7400. My broke self is about to book a trip to somewhere nice and quiet in the Karoo to recharge before life gets busy again. Like I said, taxes are overwhelming and they should not be, especially when there are affordable services for people like myself who are always busy and financially conscious.