Provisional tax

What is it?

Provisional tax is not a separate tax. It is a method of paying tax due, to ensure the taxpayer does not pay large amounts on assessment, as the tax load is spread over the relevant year of assessment. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which are based on estimated taxable income. Final liability, however, is worked out upon assessment and the payments will be off-set against the liability for normal tax for the applicable year of assessment.

The aim is to help taxpayers meet their liabilities in the form of two payments, instead of in the form of a single, large sum on assessment. A third payment is optional after the end of the tax year, but before the issuing of the assessment.

Who is it for?

Any person who receives income (or to whom income accrues) other than a salary, is a provisional taxpayer. A provisional taxpayer is defined in paragraph 1 of the Fourth Schedule of the Income Tax Act, No.58 of 1962, as any –

  • person (other than a company) 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 as defined 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 is under the age of 65 and who does not earn any income from carrying on a business – provided that person’s taxable income will not be more than the threshold (R63 556 for 2013 and R67 111 for 2014); or the taxable income of that person (earned from interest, foreign dividends and rental) will not be more than R20 000;
    • Any natural person who is 65 years or older – provided that person’s taxable income will not be derived in any way from carrying on any business; will not be more than R120 000; and will not be derived otherwise than from remuneration (such as salary), interest, foreign dividends or property rental.
      Examples of income that will make you a provisional taxpayer include rental income, interest income or other income from the carrying on of any trade.
      Companies automatically fall into the provisional tax system. There is no formal registration or deregistration needed to be a provisional taxpayer. If a taxpayer is liable for provisional tax, he or she merely needs to request and submit an IRP6 return.

What steps must I take to work out the amounts 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.

How should it be paid?

SARS has introduced changes to provisional tax which affect the way in which provisional taxpayers file their IRP6 returns. With most provisional taxpayers making their submissions electronically, SARS will no longer mail IRP6 returns to provisional taxpayers nor can it be downloaded on the SARS website. You will now be asked to send your IRP6 using one of the methods below:
  • Register for SARS eFiling. The eFiling facility allows you to ask for your IRP6 return and make your submission and payments online, and makes sure you get fast turnaround times for assessment and refund payments.
  • If you are already an eFiler, simply add provisional tax to your profile so that you can access and file your IRP6 return online.
  • Call the SARS Contact Centre on 0800 00 SARS (7277) to ask for an IRP6 return or find out more about the new Provisional Tax process.   
  • Visit the SARS branch nearest you where our staff will help you to fill in and send your IRP6 electronically.

When should it be paid?

  • The first provisional tax payment must be made within six months of the start of the year of assessment for 28 February 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 February.
  • The third payment is voluntary and may be made –
    • within seven months of the year of assessment, where the year of assessment ends in February, which is 30 September and
    • within six months of the year of assessment, in any other case.

Top Tip: Remember that, by making your submission on time, you can ensure a hassle-free, smooth submission. Late submission could lead to you being charged with penalties and interest.

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 Top FAQs

What is the purpose of provisional tax?
The purpose of provisional tax is to allow a taxpayer to pay income tax during the tax year in which the income is earned. By paying the amounts due in terms of the provisional tax liability,

Are provisional tax payments refundable?
No, in terms of Paragraph 28, provisional tax payments are not refundable. Such payments will be set off against the liability for normal tax for the applicable year of assessment.

Who qualifies as a provisional taxpayer?
With reference to the definition of a provisional taxpayer in Paragraph 1 of the Fourth Schedule of the Income Tax Act No.58 of 1962, a provisional taxpayer is:

Who is exempt from provisional tax?
The following persons / natural persons are not required to pay provisional tax: • Any person whose income is derived solely from remuneration. • Any person who does not carry on a business and

When must provisional tax be paid?
The due dates for provisional tax payments are: • First period: This payment must be made within six months from the commencement of the year of assessment • Second period: This payment must be made ...