How should it be paid?
The current process includes:
- 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.
- If you are already an eFiler, simply add provisional tax to your profile so that you can access and file your IRP6 return online.
First provisional tax return (Par 19 of the 4th Schedule)
SARS will issue an IRP6 return with a basic amount of taxable income that is based on the latest assessment of previous tax returns. If the previous tax return is older than 18 months, SARS will increase the basic amount by 8% per annum.
Your provisional tax calculation may not be less than the basic amount calculated by SARS unless you can justify the lower amount. As your calculation can’t be lower than the basic amount of SARS no penalties exist for underpayment of provisional tax for the first period, however there will be a 10% penalty for the late submission and payment of the provisional tax if you have missed the deadline.
If SARS has issued an IRP6 with a basic amount based on an old assessment and the latest assessment of taxable income has been issued, it may be used by the taxpayer as the basic amount if that assessment was issued more than 14 days prior to the deadline of the provisional tax payment.
Second provisional tax return (Par 20 of the 4th Schedule)
The second provisional tax payment is a bit more complicated than the first. Two categories exist:
- Where the actual taxable income is less than R1 Million, or
- Where the actual taxable income is more than R1 Million.
Let’s start with the first category. If your actual taxable income is less than R1 million, your estimation of taxable income for the second period may not be less than the lower of:
- 90% of the taxable income, or
- The basic amount as calculated by SARS.
If your estimation is less than the lower of the above calculated amount, a 20% penalty will be levied on the difference between your estimation and the amount calculated above.
If your taxable income is more than R1 million, you don’t have the benefit of using the basic amount as calculated by SARS. Your estimation of the taxable income for the second provisional tax payment may not be less than 80% of the actual taxable income.
If your estimation is lower than 80% of the actual taxable income, a 20% penalty will be levied on the difference between your estimation and 80% of the actual taxable income. Again a 10% penalty will be levied on the late submission and payment if you have missed the deadline.
Provisional tax has more meat to the bone than what you thought and for this reason I strongly recommend all taxpayers to keep track of their actual income and expenses.
Third provisional tax return
- 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 any applicable rebates or medical tax credits;
- Less the amount paid for the 1st and 2nd provisional tax periods.
