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What is provisional tax? Why pay provisional tax? How is provisional tax calculated?

  1. What exactly is provisional tax? You may have heard it during the tax filing process, but didn’t know much about it. The tax season starts in May every year. After the tax assessment, the taxpayer needs to pay two instalments. Sometimes it is only when the tax is paid that it is discovered that the tax is more than the original tax payable. In fact, it is a provisional tax payment. Impact. In this article, you’ll learn what provisional tax is and why it is levied.

2. What is provisional tax?

According to the information of the Inland Revenue Department, Provisional Tax is actually a government requirement, which is calculated based on the taxpayer’s income in the previous tax year and calculated for 12 months, and requires prepayment for the next tax. Part of the tax in the tax year.

When the tax is assessed in the coming year, the tax will be deducted from the provisional tax of the current year. If there is still a balance, the provisional tax of that year will be used and offset in the next year of assessment.

Since the first-time tax filer does not have the provisional tax deduction for the previous year, and may have to bear the provisional tax for the next tax year, many people ignore part of the tax and easily lose their budget.

Generally speaking, the Inland Revenue Department will make an estimate based on the taxpayer’s income for the previous year of assessment and require the taxpayer to pay provisional tax in two instalments. On the tax notice, the total amount of tax payable will show:

– Tax payable for the year of assessment (tax on estimated income from April to December of last year is payable from January to March)

– Provisional tax for the next year of assessment (Estimated income tax for January to March is payable from April to June)


In addition, the provisional tax cannot generally be refused, unless there are good reasons and an application is made to postpone or pay the provisional tax in instalments, it is likely to be regarded as a tax arrears.

2. Why is provisional tax levied?

The main reason for the Inland Revenue Department to collect “provisional tax” is to collect the tax as soon as possible, because the official payment period of the tax payable is usually set at 9 months after the end of the year of assessment, and the “provisional tax” is collected. Tax Payment” will speed up the process of collecting tax.

How is provisional tax calculated?

According to the relevant provisions of the Inland Revenue Department, the calculation of provisional tax is based on the income of the taxpayer in the previous tax year. The calculation of provisional salaries tax is as follows:

Salaries income for the previous year of assessment – ​​each deduction = provisional tax for that year

Since the provisional tax will be paid in two instalments, 75% of the provisional tax for the same year is required to be paid only after the taxpayer receives the salaries tax tax notice and the taxpayer has earned income for at least 9 months in the relevant year. ; the remaining 25% is payable after earning annual income.

The calculation of provisional profits tax is more difficult to generalize. It must be paid with reference to the amount of assessable profits in the previous year of the year of assessment, but must first be set off against the amount of losses that can be offset for the year of assessment.

What are the penalties for late payment of provisional tax?

The provisional tax is paid in two instalments. If the first instalment is not paid on time, the Inland Revenue Department will immediately regard the second instalment as due and recover it, in which an additional 5% surcharge will be levied; If the taxpayer still fails to pay the tax on time at this time, and fails to pay the above tax and surcharge after 6 months from the tax payment deadline, he will face legal action from the tax bureau and an additional 10% surcharge.

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