I t is a common practise in different countries in Africa and globally that, tax is paid upfront based on estimates of taxable income. The estimated tax is paid in different instalments depending on the tax laws applicable in a particular jurisdiction.

Paying taxes on projected taxable income gives taxpayers the opportunity to assess their business performance and obtain expected taxable income for that period. I believe this is a good approach, since taxpayers are able to project taxes due for that period. This also helps the revenue authority estimate projected taxes that it will collect during the same period.

Practically, it is expected that when one is working with estimates, chances are that after getting actual taxable income amount at the end of the period; the projected taxes will be different. As a result, taxes already paid could be on the higher or lower side compared to actual taxes which should have been paid. 

In the event an underpayment incident is identified after comparing tax due against tax paid, the law is clear on interest due if the underpaid tax gap is more than 20% of the total tax payable. Therefore, taxpayers are required to evaluate their business performance and in case of notable differences during the period under review, then there is room to review tax estimates on time. In the event of tax overpayment either as a result of incorrect projections/estimates or due to errors whilst making payments, leading a taxpayer to a repayable position, the law has clear guidelines on how taxpayers can reclaim the overpaid tax within stipulated timelines The following are some of the common questions that taxpayers have on overpaid tax.

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