Provisional Tax 2024
Author: Marietjie Esterhuizen
There is often the confusion around the different taxes, today we will focus on provisional tax.
What is it?
It is not a separate tax form income tax. It is a method of paying your (or your company’s) income tax liability in advance, to ensure that the taxpayer does not remain with a large tax debt on assessment.
Who is a provisional taxpayer?
- Natural person who derives income other than remuneration or derives income from an employer who is not registered for PAYE
- Company (including Close Corporations)
- Person who is told by the Commissioner
When is a person exempt from Provisional Tax on Additional Income?
- An individual is exempt from the payment of provisional tax if the individual does not carry on any business and the individual’s taxable income –
- will not exceed the tax threshold for the tax year.
- from interest, dividends, foreign dividends, rental from the letting of fixed property and remuneration from an unregistered employer will be R30 000 or less for the tax year.
- Deceased estates.
- Approved public benefit organisations.
- Approved recreational clubs.
- Body corporates and share block companies.
When during the year should provisional tax be paid to SARS?
There are three provisional tax payments dates throughout the year with the third payment being optional.
- First Provisional Payment
The first provisional tax payment must be made within six months of the start of the year of assessment, which for individual taxpayers are 31 August. This tax payment will take all taxable income for the period March to August of the relevant tax year into account.
- Second Provisional Payment
The second provisional payment must be made to SARS no later than the last working day of the year of assessment ending 28 February for individual taxpayers.
This payment is calculated on the full income for the year of assessment and the tax thereon is calculated according to the relevant tax bracket as per the SARS tax tables for that year. The first provisional payment made (at the end of August) as well as any PAYE should be considered when calculating the second provisional payment due to SARS to illustrate the final liability due.
- Third Provisional Payment
The third provisional payment is a voluntary payment and may be made within seven months of the year of assessment and should therefore reach SARS no later than 30 September. The third provisional payment must be accompanied by the submission on the annual tax return for that year.
What is estimated taxable income based on?
It is based on an estimate of the total taxable income derived by the taxpayer in respect of the year of assessment for which the provisional tax is payable.
What penalties can be levied on provisional returns?
- Penalties for late submission.
- Penalties for late payments; and
- Penalties based on the underestimation of your liability.
How to avoid provisional tax penalties?
- Provisional tax returns should be submitted on or by the last business day of August (first provisional return) and February (second provisional return) each year.
- Provisional payments should reflect in SARS’ provisional bank account no later than the last working day of August (first provisional return) and February (second provisional return).
- The estimated taxable income declared on the second provisional tax return should be between 80% – 90% of the actual taxable income for the year.
18th August 2023, presenters Marietjie Esterhuizen and Bianca Roux
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Kindly note this article is intended for general information purposes only and does not constitute accounting, tax, nor regulatory related advice. Should you need advice, please contact one of our practitioners.