How do I calculate the provisional tax payable from royalty income?

Author: SAIT Technical

Q: I have a client who is a permanent SA resident and has received a royalty from a book she wrote.  No tax has been deducted from this royalty. Now we would like to pay provisional tax on this royalty.  What percentage must we pay to SARS and how do we show this on her provisional tax form, bearing  in mind that she also gets a pension?

A: Royalties payable to a SA resident constitute gross income and will be fully taxable, unlike royalties payable to a non-resident by an SA resident, which is subject to a fixed percentage withholding tax (which is a final tax). In respect of the provisional tax estimate, you would in our view have to determine the "profit” (i.e. taxable income), therefore should there be any tax deductible revenue expenditure against the royalty income this must be taken into account. 

You would then proceed to calculate the normal tax liability in the usual way.

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