Taxes, Taxes and More Taxes
Its tax season! I am sure that you probably heard this or read this many times before but let’s simplify this. What is tax season and what are the requirements?
As an individual, one is affected by tax either when you pay Income Tax or Provisional Tax.
The easy one is Income Tax. When you work for an employer or a company and earn a salary or your interest, rental or dividends is less than R30,000. Basically, you do not earn anything other than your salary. Your employer pays your portion of tax to SARS and you submit the income tax return once a year, on or before the deadline, which is normally in October or November
The 2023 Income tax season for individuals opens on the 7th July 2023 and ends on 23rd October 2023 and for Provisional taxpayers until 24 January 2024.
SARS has made the following updates for the upcoming Personal Income Tax (PIT) Filing Season:
Aligning the 40 Business Days Rule to the Filing Season End Date
Last year, when the rule was first introduced, those in the auto-assessment population were granted 40 business days from the issue date of the auto-assessment to revise their return if they needed to amend their auto-assessment. This year, we are extending the 40 business days to coincide with the normal filing due date for non-provisional taxpayers, which is 23 October 2023. This will give those in the auto assessment population more time to file a return if they wish to edit their auto-assessments.
Payment Due Dates
This year, the payment due date for non-provisional eFilers will be adjusted as follows:
- For taxpayers who are not in the auto-assessment population, payment due date will be 30 days after a notice of assessment has been issued,
- For taxpayers who are auto-assessed, payment due date will be 30 days post Filing Season 2023 closing date.
Statement of Assets and Liabilities
Provisional taxpayers with business interests are required to declare their assets and liabilities (based on cost) in their tax returns each year. Taxpayers who fall within this category, and with assets above R50 million, are required to declare specified assets at market values on their 2023 tax returns.
Foreign Income Disclosure
SARS introduced a Foreign Income container on the return for taxpayers who must declare worldwide foreign income, however it was noted that taxpayers who must declare income sourced from a foreign employer while working in South Africa and/or abroad do not have an appropriate source code to declare remuneration for foreign service rendered income. The following three new fields will now apply.
- New field “Income received from foreign employment services not reflected on a South African IRP5/IT3(a) certificate, subject to tax outside RSA and the s10(1)(o)(ii) exemption does not apply”.
- New field “Income received from foreign employment services not reflected on a South African IRP5/IT3(a) certificate, subject to tax outside RSA and the s10(1)(o)(i) exemption applies.”
- New field “Income received from foreign employment services not reflected on a South African IRP5/IT3(a) certificate, subject to tax outside RSA and the s10(1)(o)(i) exemption does not apply.”.
Spouses Married in Community of Property Assessment
Taxpayers who are married in community of property are taxed on half of their interest, dividends, rental income, and capital gains. This Filing Season SARS has retrieved “Married in community of property” status from taxpayer’s previous declaration and collaborated with the Department of Home affairs to confirm marital status. Where the spouses are successfully matched and have interest investments, SARS will replicate the interest investment certificate on both spouses’ return where they will be taxed 50% upon assessment.
Section 93 Reduced Assessment
SARS has automated the process of requesting Reduced Assessment in terms of section 93 of the Income tax. The process will use a form called RRA01 where taxpayer will be able to complete it on e-Filing. This will enable efficiency and reduce costs for taxpayers
Provisional tax on the other hand, is a bit more complex than that. Let’s discuss the WHO
WHO pays this? If you earn additional income, that is not your salary. If you earn rental income, interest income or dividend income, more than R30000 per annum. You would have to register as a provisional taxpayer.
If you run your own company or business and earn an income. This income however must be more than the tax threshold. The tax threshold is as follows:
| Under 65 – R91,250 |
| Over 65 – R141,250 |
| Over 75 – R157900 |
The exceptions to the above is, small funding entities, Public Benefit Organization, a deceased estate or any association that has been approved by the Commissioner under section 30B(2).
WHEN?
Let’s look at an example
Joe who is 55 years old, runs his own business and earns R150,000 per annum. He has to register as a provisional taxpayer as he is a director of the company as he is over the tax threshold.
Provisional tax is paid twice a year. The first provisional tax return is submitted and payable in August. In this example, Joe would submit his return, due on the 31 August and he would declare R150,000. SARS would half this amount less the rebate and that will be the amount owing
| R150,000 @ 18% | R27,000 |
| Rebate (2023) | R16,425 |
| R10,575 | |
| Joe would have to pay 50% | R5,287.50 |
In February, he would have to submit the second provisional tax return and because he earns the amount of R150,000, he would declare this again. SARS would have recorded how much was already paid and deduct this paid amount and he would pay the balance.
Companies are all obligated to register for provisional tax and follow the same principle. There is also optional topup payable in September.
The 2024 due dates:
| DUE DATES | 2023 Tax year |
| 1st Provisional tax return | 2023/08/31 |
| 2nd Provisional tax return | 2024/02/28 |
| Top-up payment (Optional) | 2024/09/28 |
| Income tax return | 2025/01/23 |
Lets look at WHY?
WHY pay provisional tax?
For provisional taxpayers, it becomes a financial burden to pay one bulk amount once a year. Provisional tax thus evens out the cash flow. Two payments are made and in some cases three. The taxpayer is less burdened and SARS also receives their funds due to them throughout the year.
The provisional tax that is paid is deducted from the income tax, that is due and which provisional taxpayers are also required to submit. This is due for provisional taxpayers on the 31st January the following month.
What we all hate when it comes to SARS, is penalties but what are the penalties related to provisional tax. There are mainly two, the late payment and the underestimation.
Late payments will attract a penalty
Underestimation is a tricky one when the taxpayer cannot estimate the income earned. This estimate needs to be within 90% of the actual taxable income. If not, SARS will impose a penalty.
With all that said, and I know it is not the most exciting but we cannot get away from this.
If you have any queries, please contact me at dina@dsquaredsolutions.co.za
