Provisional Tax – Who must register.

Definition of Provisional Tax?

Provisional tax is only a method of collection of the annual taxes that would be due by a taxpayer. What is important to remember is that Provisional Tax is not a separate tax from income tax.

Provisional Tax spreads the tax liability over the relevant year of assessment, which improves on the collection of taxes for SARS. The process of collection of provisional tax ensures that taxpayers don’t run up large outstanding tax accounts with SARS.

Provisional Taxpayers must pay at least two amounts in advance by submitting a provisional tax return, during the year of assessment.

If your first 2 provisional tax payments didn't cover your tax liability you have the option to make a third payment. A 3rd voluntary provisional tax payment can be made within six months of the year of assessment (but before an assessment has been issued by SARS).

How are the Provisional Tax payments allocated?

All provisional tax payments are offset against annual income tax returns. When a taxpayer submits their annual income tax return for the year, then all the provisional tax payments are offset against their tax liability for the year of assessment. The difference becomes either tax payable of refundable.

Who is a Provisional Taxpayer?

A Provisional Taxpayer is anyone who earns income other than a salary. Most salary earners are therefore non-provisional taxpayers (if they have no other sources of income).

Important - receiving exempt income, as follows, does not make you a provisional taxpayer:

• If you receive interest of less than R23 800 if you are under 65; or
• If you receive interest of less than R34 500 if you are 65 and older or.
• You have income in a tax-free savings account.

Who is defined as a Provisional taxpayer?

• a natural person who derives income, other than a salary, commission or an allowance or advance as mentioned in section 8(1), or who derives salary from an employer who is not registered for employees’ tax (for example, an embassy is not obligated to register as an employer for employees’ tax purposes)
• company; or
• persons told by the Commissioner that they are a provisional taxpayer.

Who is not a Provisional Taxpayer?

Excluded from being a provisional taxpayer as defined are any –

• approved public benefit organizations or recreational clubs that have been approved by the Commissioner in terms of s30 or s30A.
• body corporates, share block companies or certain associations of persons.
• Non-resident owners or charterers of ships or aircraft.
• Any natural person who does not earn any income from carrying on any business – provided that person’s taxable income will not be more than the tax threshold (for 2023 tax year: for taxpayers below age of 65 –
• R91 250; age 65 to below 75 – R141 250 and age 75 and over – R157 900); or the taxable income of that person (earned from interest, foreign dividends, rental from letting of fixed property and remuneration from unregistered employer) will not be more than R30 000.
• A small business funding entity; and
• a deceased estate.

How is Provisional Tax calculated?

Provisional tax payable is based on the estimated taxable income for a particular year of assessment, and is paid as follows:

• The First Period:
• Half of the total estimated tax for the full year.
• Less the employees’ tax for this period (6 months).
• Less any allowable foreign tax credits for this period (6 months).
• The Second Period:
• The total estimated tax for the full year.
• Less the employees tax paid for the full year.
• Less any allowable foreign tax credits for the full year.
• Less the amount paid for the first provisional period.
• The Third Period (voluntary):
• The total tax estimated payable for the full year.
• Less the employees tax paid for the full year.
• Less any allowable foreign tax credits for the full year.
• Less the amount paid for the 1st and 2nd provisional tax periods.

When is Provisional Tax paid?

• The first provisional tax 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. An IRP6 is issued once submitted.
• The second payment must be made no later than the last working day of the year of assessment. This will be 28/29 February.
• The third payment is a voluntary payment and may be made within six months of the year of assessment. 

Have you submitted your provisional tax return and have you made your provisional tax payment on time? Have you received your IRP6 yet?

Contact Zeelie Professional Accountants SA to get your Provisional tax submitted and Your IRP6 safely filed.

Zeelie Professional Accountants SA has dedicated Registered Tax Practitioners registered with SAIT – The South African Institute of Tax Professionals. Call us today for assistance with your Individual or Company tax.

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