Provisional Tax Changes – How does this impact on your tax affairs?

Recent changes in tax legislation have caused a need for closer monitoring of assessments issued by SARS. The major changes are that the application of the 8% per annum increment rules must now only apply where the immediate preceding year of assessment has not yet been assessed and the last known year assessed by SARS is more than 18 months ago; also taxpayers now have to take into account any recent assessment issued by SARS up to 14 days prior to the provisional tax deadlines.

Example 1:

2011 assessed 01.02.2012 (more than 18 months after end of the latest preceding year – 2011 vs 2013 => 24 months)

2012 assessed 15.02.2013 (13 days prior so ignore)

02.2013 due 28.02.2013

• Last known assessment to be increased by 16% as 2011 was last year assessed (more than 18 months prior) – 8%  for 2012 and 8% for 2013

Example 2:

2011 assessed 01.02.2013

2012 assessed 08.02.2013 (20 days prior)

02.2013 due 28.02.2013

• 2012 to be used as a basis for 02.2013 and as year prior then no increment to be applied

Calculations relating to penalties for under-estimation have also been adjusted to now take into account Employee’s tax (PAYE) or Provisional taxes actually paid by the taxpayer in the calculation of the penalty. Ie, if the actual tax paid is higher, a penalty for under-estimation will only be imposed where the full tax liability as required for the year was not paid by the end of the tax year.