What is meant by 'prepayments'?
When you receive income, you are expected to pay tax on it. Most people pay their income tax by having their employers withhold an amount at the percentage rate printed on their tax card. If your payor is not withholding tax directly on the income you receive from them – for example, if you have rented out an apartment and receive rental income for it – you must pay the income tax in the form of prepayments. Typically, private individuals who must make prepayments are those who are self-employed, have a trade name or business name (T:mi), and are registered in the prepayment register.
What kind of income is taxed by way of prepayments?
For most private individuals, income subject to prepayments is
- Rental income
- Capital gains from a sold asset/property
- Income from agriculture, and income from self-employed business operations.