Q: We need to
submit our provisional tax 30 June. Can we use our projections for this year or
must we use last year’s numbers. We made a profit last year but this year we
forecast a big loss. We are in a project environment and with the economy slow
that the customers have postponed their capital projects and we will make a
profit next year again. Can you please advise on how the provisional tax must
A: A provisional
taxpayer is required to make an "estimate of the total taxable income which
will be derived by the taxpayer in respect of the year of assessment in respect
of which provisional tax is or may be payable by the taxpayer” – see paragraph
19(1) of the Fourth Schedule to the Income Tax Act. Using "last year’s numbers” would not
necessarily constitute an estimate which "was seriously calculated with due
regard to the factors having a bearing thereon” as required by paragraph
20(2). By using that the taxpayer runs
the risk of not being within the "80% of the amount of the actual taxable
income” limit as required by paragraph 20(1) and it increases the risk of an
underestimation penalty being levied.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
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