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Provisional Tax season can become a nightmare if you fail to submit your return and payment timeously and accurately. Non-payment, late payment or insufficient payment may lead to you being charged with penalties and interest.

February is provisional tax season. Don’t fall victim to the harsh punishment of SARS for not complying to their Provisional Tax Return Policies.

What is provisional tax?

SARS describes provisional tax as “not a separate tax from income tax. It is a method of paying the income tax liability in advance, to ensure that the taxpayer does not remain with a large tax debt on assessment. Provisional tax allows the tax liability to be spread over the relevant year of assessment.”

How do you know if you must pay provisional tax?

Anyone who receives an income other than a salary, is a provisional taxpayer. And even when you do earn a salary but have other avenues of income, you might also have to register as provisional taxpayer.

As per paragraph 1 of the Fourth Schedule of the Income Tax Act, No. 58 of 1962, a provisional taxpayer is any –

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

Types of income accrued that will define you as a provisional taxpayer, includes, but are not limited to:

  • Pension
  • Interest
  • Property Rental income (including Air B&B)
  • Other trading income

You are obliged to declare these types of income and therefore also to register as a provisional taxpayer. Talk to us and be honest about your income sources. SARS does not have much sympathy with people not paying what is owed to it. There are amount thresholds applicable which might exempt you from paying provisional tax on these incomes, which we will discuss with you during a tax planning meeting.

When and how is Provisional Tax payable?

The first step is to register for provisional tax, which we can assist you with. Your Tax Accountant can assist you in calculating your taxable income for that particular year of assessment. Provisional Tax is payable every 6 months of a financial year, depending on the financial year end of your company. For individuals the following periods will apply:

  • The First Period – August
    o When half of the total estimated tax for the full year is payable.
  • The Second Period – February
    o When the total estimated tax for the full year is payable.
  • The Third Period is for voluntary disclosure and payment.

During the final yearly return period, everything will be summarised and calculated. If you paid too little or not at all, SARS will impose hefty penalties on you.

Don’t wait until it is too late to be honest about your taxable income. Rather register now and declare your taxable income for 2020 that you have not paid provisional tax on. With our holistic approach and attention to detail, we will ensure proper tax planning and accurate calculations within legislative deadlines, keeping you safe from SARS’s penalties and interest.

Contact Deon Grové or Marcel Eksteen at 012 347 0561, or email deon@iqaccounting.co.za or marcel@iqaccounting.co.za today to assist you in tax structuring based on your specific situation and needs. Don’t wait until it is too late – Provisional tax is payable by end of February!

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