By Bradley Woolridge CA (SA), Director at Burns Acutt – 18 August 2020
How Provisional tax is affected.
The COVID-19 tax relief is governed according to the Draft Disaster Tax Administration Relief Bill – 1 April 2020.
A qualifying taxpayer is a company, trust, and individual that: i) Conducts trade; ii) The gross income does not exceed R100 million during the year of assessment starting on or after 1 April 2020 to 31 March 2021; iii) The gross income for the year of assessment must not include more than 10 percent of income derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer.
A micro business for the purpose of this process, is a micro business as defined in the Sixth Schedule to the Income Tax Act.
That is tax compliant: this means that the taxpayer must be fully tax compliant qualifying for a tax clearance.
The taxpayer must be registered for all applicable taxes.
All tax returns across all tax types must have been submitted.
No outstanding tax debts, unless there is a valid payment agreement, approved suspension of payment pending an objection or appeal, or tax debt less than R100.
The deferral of the provisional tax payment applies to qualifying taxpayers who are required to submit provisional tax returns for the period starting from 1 April 2020 to 31 March 2021.
The first provisional tax payment due from 1 April 2020 to 30 September 2020 will be based on 15 % of the estimated total tax liability.
The second provisional tax payment from 1 April 2020 to 31 March 2021 will be based on 65% the estimated total tax liability (payment will be 65% less the 15% already paid).
The remaining 35% of the provisional tax liability will be deferred and payable when making the third provisional tax payment. This must be paid by the due date applicable to the relevant taxpayer. Administrative penalties and interest will not be levied on the deferred provisional tax liability for the first and second period.
COVID-19 tax relief will not apply to provisional taxpayers failing:
- The tax compliance test.
- The gross income threshold.
- To pay the 15% or the 65% by the relevant due dates.
Where it is discovered that the provisional taxpayer did not qualify for the COVID-19 tax relief, the relevant relief will be withdrawn, and normal penalties and interest will apply.
The deferral is exactly that, a deferral and all taxes will have to be paid in the end.
You are not required to opt for the provisional tax relief measures and can choose to declare and pay provisional tax as normal (50% first provisional and 50% second provisional with third provisional optional top-up payment).
Strategic approach to your Provisional Tax
If you are unsure about any of the above information, please feel free to reach out and we will assist you.
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