As a busy retailer, tax is probably the last thing on your mind right now. But as we move into the 2021/22 income tax year, it is essential to get your house in order and prepare your provisional tax payments. But as we’re nearing the end of the 2021/2022 income tax year, it is essential to get your house in order and prepare your provisional tax payments. To streamline this process, we have created a quick guide on what needs to be prepared for tax. We also have a solution to alleviate the pressure that paying provisional tax may cause in your business.
The 2021/22 tax year for individuals and Incorporated businesses with a 28 February year-end has the following payment cycles:
Companies automatically fall into the provisional tax system but if you are a business owner who is a sole proprietor or a partnership, earning income over and above a salary (such as profit share, rental income, interest etc.), you will also have to submit provisional tax returns.
No, provisional tax is a way to pay your income tax over the course of the tax year in two or three payments, instead of having to pay one large lump sum. The difference between PAYE and provisional tax is that PAYE is deducted from actual salaried earnings, while provisional tax is based on estimated taxable income. Because the amount is estimated, you may need to pay more at the end of the tax season, or alternatively, SARS may need to refund you if you have paid too much.
The simplest way to do this is to use your taxable income from the previous tax period, or even two tax seasons prior, as Covid may have impacted your earnings. Then adjust it for your expected change in turnover/income for the new tax year. You may expect a growth based on new services offered or a drop if your business had a Covid-related decrease in turnover.
You can also visit https://www.sars.gov.za/types-of-tax/provisional-tax/how-to-work-out-amounts-due-for-provisional-tax-example/ to see if you’re doing the calculations correctly.
A Merchant Cash Advance is a financial product that empowers retailers to fund their provisional tax. Here you are able to repay the facility used to pay provisional tax, in line with future turnover. Many financiers will prescribe how you use the funding provided, but a Merchant Cash Advance is different. If this is the place you would like to invest your facility, then the choice is yours. Best of all, should you select a 6-month repayment term or less, you can then pay off your finance facility in time for your next provisional tax payment. Creating a rolling 6-month facility for provisional tax will in turn alleviate any pressure from your monthly cash flow. Leaving you to do what you do best, run your business!