Blog

bt_bb_section_bottom_section_coverage_image

Provisional Taxes

What you need to know about provisional taxes, who it affects, when it must be paid and how it is calculated.

Provisional tax is a prepayment of income tax. It is a method employed by SARS for the collection of income tax that is due to them for a tax year.

Who is a provisional taxpayer?
  • All companies; and
  • Natural Persons (excluding companies) who derives income that is:
    • remuneration from an employer that is not a registered employer;
    • an amount not defined as remuneration;
    • not an advance or allowance as defined in the Income Tax Act; and
  • A person notified by the Commissioner of SARS.
When must provisional tax be paid?
  • The first payment must be made within six months of the start of the year of assessment. For years of assessment starting March, this will be 31 August. If that day falls on a Saturday, Sunday or public holiday then the payment is due on the last business day before that date.
  • The second payment must be made no later than the last working day of the year of assessment. For years of assessment starting March, this will be last business day of February. This amount must be within 80% or 90% of the actual taxable income (depending on the taxable income of the taxpayer) in order to avoid under-estimation penalties.
  • The third payment is voluntary and may be made as follows:
    • for companies with a year end of the last day of February, and any other person (other than a company), the last business day of September;
    • in any other case, within six months of the end of the year of assessment.
How is provisional tax determined?

It is determined based on an estimated taxable income for the tax year. Here’s a step-by-step approach:

  • Company

First provisional tax payment
    • Determine the estimated taxable income for the tax year which can be based on the company’s forecast or the actual taxable income can be annualised for the tax year.
    • Determine the estimated taxes payable for the tax year.
    • Half the estimated taxes for the tax year.

Second provisional tax payment

    • Determine the estimated taxable income and the total estimated tax for the tax year using the approach discussed above.
    • Less the amount paid for the first period.

 

  • Natural person

First provisional tax payment
    • Determine the estimated taxable income for the tax year which should include all income (e.g. remuneration, trade income and passive income).
    • Determine the estimated taxes payable for the tax year.
    • Less any applicable rebates or medical tax credits.
    • Half the estimated taxes for the tax year.
    • Less any allowable foreign tax credits for this period (6 months).
    • Less the employee’s tax for this period (6 months)
Second provisional tax payment
    • Determine the estimated taxable income and the total estimated tax for the tax year.
    • Less the employees tax paid for the tax year.
    • Less any allowable foreign tax credits for the tax year.
    • Less any applicable rebates or medical tax credits.
    • Less the amount paid for the first provisional period.

 

Must I make a third provisional tax payment?

It is not compulsory. The taxpayer chooses to make the third payment to avoid interest from accruing on the actual taxes outstanding.

 

How/Where do I submit my provisional tax payments?
  • Register for SARS eFiling. The eFiling facility allows you to request an IRP6 return (provisional tax return) and make your submission and payments online. You can register once for all different tax types using the client information system.
  • If you are already on eFiling, simply add the provisional tax to your profile so that you can access and file your IRP6 return online.

 

If you are unsure of how Provisional Tax affects you or your company, have a chat with us and we can assist you with more guidance. Book a call with us here. 

Share