Provisional Tax Explained




Provisional Tax deadline is at the end of February every year, but so many people do not know what it means. That's okay. We are here to help you - not only to get your tax under control but also to better understand what is required for handling your tax responsibilities better.


LET'S START WITH WHO NEEDS TO PAY:


Any person who receives income (or to whom income accrues) other than a salary, is a provisional taxpayer. Most salary earners are therefore non-provisional taxpayers if they have no other sources of income. It is important to note that receiving exempt income, does not make you a provisional taxpayer (more on this on a blog post we will publish later this week).


SO, WHAT IS PROVISIONAL 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. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which is based on estimated taxable income. If you notice you have not paid enough, a third top up payment is optional after the end of the tax year (before the submission of the actual IT12 tax return during July and November each year).


On assessment of your IT12 tax return, the provisional payments will be off-set against the liability for normal tax for the applicable year of assessment, where you will receive a refund if you over paid in tax.


HOW MUCH DO I NEED TO PAY


The HOW MUCH needs to be calculated and based on the estimated taxable income for that particular year of assessment. It is broken up in 3 periods. We also mention WHEN it is due:


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).


When? Six months after the start of the year of assessment. Ie: For years of assessment starting March, this will be 31 August.


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.


When? No later than the last working day of the year of assessment. This will be on 28/29 February.


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? Before the submission of your IT12 tax return.


How do you pay?

There are a few ways of paying your Provisional tax.

• Register for SARS eFiling. The eFiling facility allows you to request for an IRP6 return and make your submission and payments online. You can register once for all different tax types using the client information system.

• Phone the SARS Contact Centre on 0800 00 7277

• Visit a SARS branch


OR BETTER YET, why waste your time on lengthy phone calls and endless queues at SARS, contact us at Mint Accounting and one of our qualified staff will assist you gladly. tax@mintaccounting.co.za

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