Provisional tax deadline is looming
De Wet de Villiers
The second provisional tax deadline for this tax year is coming up at the end of February.
What is provisional tax?
Provisional tax is normal tax that’s been divvied up throughout the tax year.
Payments are due twice within a tax year. The first provisional payment is due within the first six months of the tax year and the second at the end of the tax year.
There is also the option of a third payment after the tax year should an amount be outstanding before your tax return is submitted.
For the 2024 tax year, the deadline for the first provisional tax return was on 31 August, 2023, while the second deadline is 29 February. The third payment option is due on 28 September.
The provisional tax system has pros and cons for the taxpayer.
On the one hand, your liability is spread across the tax year. On the other hand, more regular payments require you to keep liquid assets on hand throughout the year.
Meanwhile, the fiscus is provided with more regular cash flow, which is preferable.
Who is liable for provisional tax?
A provisional taxpayer typically receives income from sources other than (or in addition to) employment income.
This could be interest, dividends, foreign dividends and/or rental from the letting of fixed property, and when added together exceeds taxable income of R30 000 per tax year.
How is provisional tax calculated?
Provisional tax is automatically calculated upon the submission of the IRP6 form with the South African Revenue Services (Sars).
The process is based on estimates and assumptions since accurate amounts are not always available within the tax year.
Penalties
To encourage provisional taxpayers to submit provisional tax returns on time, pay on time and pay the right amount, Sars may impose a late payment penalty equal to 10% of the tax liability due if your second provisional tax payment is not reflected in their account on the last day of February.
This article was first published on Just One Lap, and is republished with permission.