What is the provisional
tax system?
provisional tax is, in simple terms, a system
whereby the tax due for a particular year is
collected during the same period in which the
income is earned.
the system applies mostly to persons whose sources
of income include trade, business, profession
or vocation. all companies and bodies of persons
who are liable to tax fall under this system.
What
is the pt benchmark?
every person that falls within the pt system
has a benchmark of his own that varies from
year to year. this is equivalent to the tax
which was payable during the benchmark year,
as resulting from the self-assessment submitted.
the benchmark
year of assessment is the last year of assessment
in respect of which a tax return was due to
be furnished before the commencement of the
calendar year in which the first pt instalment
for a basis period falls due.
this might sound
complicated, but in reality is simply two years
back for an individual and a company with a
december year-end. so the benchmark year for
b/y 2003 is b/y 2001. the above definition gives
a different resulthowever, with companies that
do not adopt december as their year-end date.
the figure of
tax payable must exclude tax paid at source
(including provisional tax on capital gains)
but must include all other PT payments for the
year.
a simple case:
| tax payable basis
year 2000 |
lm 1,000 |
| less - provisional tax paid
during b/y 2000 |
lm 300 |
| less - tax at source paid
during b/y 2000 |
lm 200 |
| tax underpaid for b/y 2000 |
lm 500 |
the benchmark for basis year 2002
based on the above figures would be lm 800.
when
is the pt payment due?
pt is paid in
three instalments during a basis period of twelve
months from january to december (other rules
apply for companies with different accounting
dates).
| first payment |
30 april |
this
is always the first instalment in the
case of individuals and companies with
a december year-end. for companies with
a different year-end, the first pt instalment
will depend on which of the dates comes
first during the basis period. |
| second payment |
31 august |
this is always the
second instalment in the case of individuals
and companies with a december year-end.
for companies with a different year-end,
the second pt instalment will depend on
which of the dates comes second during
the basis period.. |
| third payment |
21 december |
this is always the
third instalment in the case of individuals
and companies with a december year-end.
for companies with a different year-end,
the third pt instalment will depend on
which of the dates comes third during
the basis period.. |
what is
the amount of pt due for each instalment?
| first payment |
20% of benchmark (minimum) |
in the case of individuals,
this is always 30 april |
| second payment |
30% of benchmark (minimum) |
in the case of individuals, this is always
30 april |
| third payment |
50% of benchmark (minimum) |
in the case of individuals, this is always
30 april |
other
relevant matters
Penalties will be charged for late payments
of pt instalments. interest is charged at the
rate of 1% per month until payment is done.
the amount of
pt payable may be reduced by filling in a pt
reduction form. great care has to be taken here
as you may incur high penalties for underestimating
your eventual tax charge.
if your benchmark is based on a tax statement
as estimated by the commissioner, this would
be revised as soon as you submit your self-assessment.
if you submit
an adjustment form (af1 or af2) to correct your
self-assessment that provided the basis of your
benchmark, then both your pt benchmark and pt
payments would be altered.
during your first year of trading, you are not
obliged to pay pt. any tax due would have to
be paid by the tax return submission date.
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