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Apr 25 2021
What is Provisional tax?

It is a separate tax but a way to paying your income tax as you receive income through the year. If you residual income tax is more than $2,500, you’ll have to pay provisional tax for the following year.

There are 3 options that you can choose from-standard, estimation and ration.

Due dates for provisional tax

Category 1st Instalment 2nd Instalment 3rd Instalment 4th Instalment 5th Instalment 6th Instalment
Not registered for GST 28 August 15 January 7 May      
GST-Registered-6 monthly filer of GST returns 28 October 7 May        
GST-Registered-one-or two monthly filers of GST Return 28 August 15 January 7 May      
GST-Registered and elected to use the ration option for provisional tax 28 June 28 August 28 October 15 January 28 February 7 May
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Apr 25 2021
What are the income tax rates for the business structures?

a) Sole Trader

*They will have to manage their own business and are responsible for all the business’s income and debts.

*Sole traders don’t pay themselves wages instead take out drawings when they need money for personal use.

*Drawings done by a sole trader is not tax deductible

b) Partnerships

*Partnership itself doesn’t pay tax on its income or profit, nor do the partners pay tax on any regular drawings that they do form the business. Instead, at the end of the year if the business makes any profit, then the profit is allocated to the partners as per the agreement among the partners.

We can’t reallocate partner’s share of income or losses if there’s a bona fide contract.

Generally, the partner who works for the partnership can be paid salary with PAYE deducted if there’s a contract of service.

c)Limited Liability Company

Any profits made belong to the company.

The company can distribute money in 3 ways.

  • The shareholders can periodically withdraw money from the company. At the end of the year the company calculates a salary amount on which the shareholder will have to pay income tax on.
  • The shareholder can be paid wages/salaries with PAYE deducted. These are treated as the deductible business expense for the company.
  • The company can also pay dividends to the shareholder out of the profits that remain after tax.

d)Non-Profit Organisations

Unless your organisation has been approved by Inland Revenue as being fully exempt from income tax, the organisation must file an income tax return each year. There are several income tax exemption entitlements available as long as none of the income or funds are distributed to the members.

The organisation main aim must be to meet the requirements of the particular exemption. You must apply for income tax exemption as it is not automatic.

You must include the following while applying.

  • Copy of organisation’s written rules or constitution
  • Copy of certificate of incorporation, if organisation is incorporated
  • Details of how the organisation will operate

e) Charities register

You will need to register your charity with Charities Services. There are 2 main conditions that need to be fulfilled.

  • The charity’s purpose and activities must be exclusively charitable
  • None of the charity’s income or fund may be used to benefit its members, trustees or associates.

If your charity is fully exempt form income tax, you will not need to file an income tax return unless Inland Revenue department will ask you to. A registered charity is also exempt from having RWT deducted from its interest and dividend income. HI sis known as having RWT exempt status.

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