Provisional Tax is an estimated total amount of income tax payable in advance in quarterly installments. Section 84A of the Taxation Act states that every person chargeable with income tax shall at the beginning of every year of assessment estimate the total amount of income tax payable. All persons whose income is subject to income tax are liable to pay provisional tax.
Provisional tax shall not apply to an individual whose taxable income for the year of assessment is estimated; not to exceed K420,000; to exceed K420,000 but the whole income is from employment or from pension or from both employment and pension and in relation to which Pay As You Earn (PAYE) is being deducted; and to exceed K420,000 and include non-employment or non-pension income which is not more than K420,000.
An estimated amount of not less than 90 percent of the actual income tax liability for the year of assessment in question should be paid by the time a return of income is due. Provisional tax is paid quarterly, within 25 days from the end of each quarter. Provisional tax for the quarter ending 30th September, 2018 is due by 25th October, 2018. Provisional Tax Forms PTF1 and PTF2 are used for payment.
Taxpayers with seasonal income are required to make arrangements with Malawi Revenue Authority (MRA) on payment of their provisional tax.
Provisional tax relieves the taxpayer the burden of paying lump sums at the end of the year and accords the government a steady flow of revenue. A taxpayer should pay the entire amount estimated as Provisional tax at the end of his accounting period and any shortfalls should be paid within 180 days from the end of his business year.
A person eligible to pay provisional tax but fails to do so shall be liable to a penalty.
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