Some companies allow employees to elect to pay extra tax toward the bonus throughout the year, and not when they receive their bonuses.

This feature is called Provision for Tax on Annual Bonus and requires the user to ensure the provision for tax amounts are correctly entered on the payroll, to calculate the correct tax amount.

If provision for tax on annual bonus was not done correctly, it could result in higher tax (if the employee did not provide enough during the tax year) or tax refunds (if the employee over-provided during the tax year) in February / when the employee contract is terminated.

How does it work? Basically, the guaranteed bonus amount is divided by the number of processing period during the tax year, and the portion is added to the taxable income on the TAX screen of an employee. This increases the monthly remuneration in each month, but the employee is not taxed on the bonus on payout.

Click here to read more on this feature.

Need assistance? 

We strongly recommend that you book a consultant to review your tax provision setup in your company, assist in setting up automated provision calculations and write provision reports to track your provision throughout the year. Click here to book a consultant.