Provisional Tax and Withholding for the Self-Employed: Not “Am I Paying Twice?” — Here’s How It Really Works

In my first meeting with a self-employed professional, the confusion I run into most is this: “provisional tax, withholding, annual income tax… am I paying tax three times on the same earnings?” The answer is clear — no. These are instalments of the same tax, paid at different times. Set the mechanism up right and there’s no year-end surprise; in fact, most taxpayers end up in a refund position.

Provisional tax: a flat 15%, not an extra burden

Annual income tax is calculated on a progressive tariff — as earnings grow, the rate rises. Provisional tax works differently: the rate of the tariff’s first bracket (15% in 2026) is applied to all of your earnings. Flat and single-rate.

The logic is simple: provisional tax is an advance. The state collects part of your tax before the year is out, but to avoid taking too much it uses the lowest rate. The real, progressive calculation is done at year-end. So provisional tax isn’t a separate burden but the advance-paid portion of your year-end tax.

The three-month rhythm

Provisional tax is declared in three-month periods; each period is calculated on the cumulative earnings up to that date, with what was paid in the previous period deducted. So during the year you file four small “mini-returns” and your burden is spread across the calendar — you don’t face one big tax bill all at once at year-end.

If income is high in one quarter, the cumulative calculation in the next period automatically balances it; each period doesn’t start from scratch. In a period where you make a loss, no tax base forms and no provisional tax arises.

Withholding doesn’t vanish — this is the costliest misconception

When you invoice a company, the party making the payment withholds 20%. The costliest mistake I see in the field is the taxpayer treating this 20% as a cost — “it was withheld, it’s gone.” It isn’t. That money sits at the tax office in your name, as your prepaid income tax.

On the year-end return, both the provisional tax you paid and the withholding deducted are subtracted from the calculated income tax. For most self-employed taxpayers with withholding, the sum of these two exceeds the annual tax — and the difference is refunded to you.

The only condition: documenting the withholding correctly. You need to collect the withholding statements (the details from the deducting institution) month by month; trying to gather them at year-end is the number-one reason offsets get missed.

Three common mistakes

1. Calculating provisional tax with the tariff. Provisional tax is a flat 15%; the progressive tariff belongs to year-end. Applying the tariff on the period return makes you pay too much.
2. Forgetting to offset the withholding. If the 20% deducted isn’t entered on the return, you can’t get back the tax you prepaid.
3. Leaving expenses undocumented. Net earnings = revenue − documented professional expenses. An undocumented expense doesn’t reduce the tax base and makes your tax come out higher than it should.

A note: if your client is an individual

Withholding is deducted only on payments from companies/businesses. If your end clients are individuals, the withholding line is zero; in that case provisional tax is the only prepayment, and at year-end you usually end up with tax to pay rather than a refund. You need to plan your cash flow accordingly.

I’d say that, most of the time, the only thing that changes is “writing the same numbers into the right channel.” If you’d like to design your self-employment filing and offset process together, take a look at the Tax Returns service, and you can reach me here.

Note: This article is for general information; rates and thresholds can change. For circumstances specific to you, please get in touch with me.