What is Provisional Tax?

Provisional tax is not a separate tax. It is a method of paying your tax due to SARS over the relevant year of assessment. Provisional taxpayers are required to submit two returns during the year of assessment. These payments are based on the estimated taxable income. Upon assessment at the end of the tax year, the payments will be off-set against the liability for normal tax for the applicable year. A third payment might then be required.

Who qualifies as a Provisional Taxpayer?

Any person who receives income (or to whom income accrues) other than a salary qualifies as a provisional taxpayer. (For example, if you earn a salary and rental income you pay provisional tax.) A provisional taxpayer is defined in paragraph 1 of the Fourth Schedule of the Income Tax Act, No.58 of 1962, as any –

  • natural person who derives income, other than remuneration or an allowance or advance as mentioned in section 8(1);
  • company; or
  • person who is told by the Commissioner that he or she is a provisional taxpayer.

Excluded from being a provisional taxpayer are any –

  • approved public benefit organisations or recreational clubs;
  • body corporates, share block companies or certain associations of persons; and
  • persons who are exempt from paying provisional tax, namely:
    • 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; or the taxable income of that person (earned from interest, foreign dividends and rental from letting of fixed property) will not be more than R30 000 per annum.

How do you calculate the tax due?

The amount of provisional tax payable is worked out on the estimated taxable income for that particular year of assessment, 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 should it be paid?

  • The first provisional tax payment must be made within six months of the start of the year of assessment (no later than 31 August) or six months after the approved financial year end date .
  • The second payment must be made no later than the last working day of the year of assessment ending 28/29 February.
    • If the provisional tax does not submit a provisional tax return within four months after the last day of the year of assessment, then the provisional taxpayer shall be deemed to have submitted an estimate of an amount of nil taxable income.
    • within four months of the year of assessment, where the year of assessment ends in February.
  • The third payment is voluntary and may be made:
    • within six months of the year of assessment, in any other case.

Should you require assistance with the calculation of your provisional tax liability, contact Tracey Jones on +27 21 914 0261.

Click here to download documents required by C2M to assist with your personal income tax return.

Article published by Tracey Jones, a registered Tax Practitioner and Director of C2M Tax Assurance.
Tracey Jones

Tracey Jones

C2M Tax Assurance Director

Contact

+27 21 914 0261