4. Further to the above Q&A, do I also have to pay Provisional Salaries Tax for the subsequent year of assessment? When do I pay my Salaries Tax and Provisional Salaries Tax?
 
Yes, the Salaries Tax demand note for you would consist of two components:
2004/05 Salaries Tax
2005/06 Provisional Salaries Tax
Total Salaries Tax payable |
$280
$14,800
$15,080 |
Calculation of “PST” (the short form for “Provisional Salaries Tax”) for 2005/06 is based on the income for 2004/05, but grossed up to 12 months, as follows:
Year of Assessment 2005/06 (i.e. 1/4/2005 – 31/3/2006) |
$ |
Income ($20,000 x 12) |
240,000 |
Less: MPF contributions ($1,000 x 12) |
(12,000) |
Net Total Income: |
228,000 |
Less: Basic allowance |
(100,000) |
Net Chargeable Income: |
128,000 |
PST at progressive rate on $128,000 |
|
– First $30,000 x 2% |
600 |
– next $30,000 x 8% |
2400 |
– next $30,000 x 14% |
4,200 |
– Balance $38,000 x 20% |
7,600 |
|
14,800 |
PST at standard rate $228,000 x 16% |
36,480 |
PST payable (the smaller amount) |
14,800 |
My total tax bill is $15,080 ($280 + $14,800). When do I pay? Do I pay by two installments?
Normally you would be asked to pay the sum of $15,080 ($280 + $14,800) by 2 installments as follows:
Amount payable |
Due date |
1st installment $11,380 ($280 + $14,800 x 75%) |
around Jan. 2006 |
2nd installment $3,700 ($14,800 x 25%) |
around April 2006 |
By 1 January 2006 you would have earned income for 9 months from 1 April 2005 to 31 December 2005 (75% of annual income). By 1 April 2006 you would have earned income for the 12 months to 31 March 2006. Assuming that there is no change on your monthly income on year 2005/06 (comparing with the previous year), paying provisional tax is actually not paying tax in advance, nor paying tax on future income.
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