Here is another something I have stuggled with, trying to find some help and information about filing provisional tax in South Africa. It feels really complicated, but I'm sure that once I have the hang of it it should be really simple. However as usual, it is one of those things that have very little help and information out there. So, in honour of what I started this blog for let me document what I have learnt so far.What is Provisional Tax?
Provisional Tax is for individuals who are earning a bit of income on the side or are self-employed. This is how you declare to SARS your extra earnings from things such as Rentals, Sole Proprietor activities, etc.
What do you need to do?
It was easy to discover that you need to pay provisional tax at least twice a year. The first deadline is 31 August and the second is 28 February of the following year (the end of the tax year). In August you need to estimate your annual income, i.e. what you think you will have earned by the end of February, you type in the full estimated amount and then SARS will ask you to pay half of the estimated amount. Before the end of February you can get a more accurate estimate of your full year profit and submit a more accurate figure. These forms are called IRP6 forms. Then finally, once the tax year is finished you can do your final accounting for your business and complete the normal ITR12.
Trying to calculate your Taxable Income
This is where the information gets scarce. What can be deducted as expenses for your business? The short answer is "Everything that is an expense for your business". That is not helpful at all! I already know that, but what I need to know, for example, is my domestic worker's salary a deductible expense? The
Here is my list that I have managed to glean through a thorough search.
Medical Scheme Fees Tax Credit
Firstly you need to understand the Medical Fees Tax Credit. I assumed that you could put your full Medical Scheme Fees here, but you can't. This year (2014/2015 Tax Year) the amounts are R257 for yourself, Another R257 for the first Dependant that is also on your medical aid. Finally an additional R172 for each Dependant thereafter. You then claim this for each month you contribute to the scheme. So for a family of three this will be R257 + R257 + R172, totaling R686 for each month. If you were on the medical scheme for the full year you can claim R8 232.
You can get the latest figures for each Tax Year direct from SARS Website here.
Other Deductions
- Internet costs (try to portion between personal and work)
- Phone Costs (try to portion between personal and work)
- Depreciation on your vehicle (You can depreciate it over 5 years)
- Depreciation on your cellphone, desk, Computer (you can depreciate over 3 years)
- Petrol for work as per your travel log
- Vehicle Maintenance also divided up between work and personal as per your travel log
- Cleaning Material
- Cleaning Services (Pay your maid separately for this service so that there is a clear distinction)
- If you have a home office you can claim the portion of electricity, bond interest and rates and taxes for your home office. I calculated this using my office size (say 10 square meters) divided by my home size (say 200 square meters) giving me the percentage (this example gives 5%)
- Pension / provident fund contributions.
- Medical Expenses actually incurred such as medicine and doctors costs.
These are just some of the ideas I have found to make sure you get all those costs in there. You don't want to pay SARS more than you have to, however it is important that you pay your taxes, it is your contribution to the privilege to do business in South Africa.
