What is provisional tax?
Provisional tax is not a separate tax, but simply income tax that is collected in advance, twice a year. The two instalments ensure that the taxpayer doesn’t have to fork out a single and larger lump sum payment at the final tax deadline.
When to file provisional tax?
The dates to file provisional tax are halfway through the tax year (31 August for the 2023 tax year) and again on the last business day thereof (28 February for the 2023 tax year). In these returns, provisional taxpayers are required to estimate their taxable income for the year of assessment and pay provisional tax on the estimated amount.
On assessment, the provisional tax payments are set off against the taxpayer’s normal tax liability, which can either result in payment due or a refund.
Who is a provisional taxpayer?
Companies or individuals will be notified by the Commissioner (i.e. SARS) if they are provisional taxpayers.
Salaried employees who have pay-as-you-earn deducted from their payslips will not be provisional taxpayers unless they earn additional income from another source, such as capital gains, rental income, interest, dividends, or income from an unregistered employer which exceeds R30,000 in the tax year.
Where a person is not a salaried employee but conducts a trade, they will be considered a provisional taxpayer where their income exceeds the tax threshold. For the 2023 year, the thresholds are:
| Under 65 | R91,250 |
| 65 and older | R141,250 |
| 75 and older | R157,900 |
As always, there are exceptions. Certain persons are excluded from being provisional taxpayers, which, amongst others, include small business funding entities, specific public benefit organisations, and deceased estates.
Why is filing provisional tax important?
Failure to file provisional tax or incorrectly estimating your taxable income may result in underestimation penalties, which can be quite hefty. Late payment penalties are also applied if the estimated tax is not paid on time.
It’s important for all provisional taxpayers to be aware of the provisional tax obligations and ensure that these are adhered to prevent penalties.
Tax Tuesday
Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.