Provisional tax is 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 have a large tax debt on assessment. Provisional tax allows the tax liability to be 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. A third payment is optional after the end of the tax year, but before the issuing of the assessment by SARS. On assessment the provisional payments will be off-set against the liability for normal tax for the applicable year of assessment. Who is a Provisional Taxpayer? Any person who receives income (or to whom income accrues) other than remuneration, is a provisional taxpayer.
Most salary earners are therefore not-provisional taxpayers, if they have no other sources of income. It is important to note that 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 receive exempt amount from a tax free savings account. 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) 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.
Excluded from being a provisional taxpayer as defined are any – approved public benefit organisations 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 that are exempt from tax; Non-resident owner or charterer 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 2021 tax year: for taxpayers below age of 65 – R87 300; age 65 to below 75 – R135 150 and age 75 and over – R151 100); 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; a deceased estate. 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 years of assessment starting March, this will be 31 August, if it is a business day, or the last business day before that date if it falls on a Saturday, Sunday or public holiday. The second payment must be made no later than the last working day of the year of assessment. This will be last business day of February. The third payment is voluntary and may be made: for companies with a year end of the last day of February, and any other person (other than a company), the last business day of September; in any other case, within six months of the end of the year of assessment.
