Let’s start with why provisional tax exists. It is simply a way to spread the tax amount due by the person or company over a period of time. This is to ensure that a large amount of tax is not due when the relevant assessment has been completed. Basically it is similar to Pay As You Earn (PAYE), except it is less frequent. Where PAYE is due monthly, provisional tax is due every 6 months. Straight to the point, SARS wants to ensure that they get their money while it is most likely that you still have cash. To answer the question of who should register for provisional tax, it is any person that derives any income other than a salary. In other words any income on which PAYE is not paid. Thus if you earn a salary and for example earn rental income you should register. From the SARS website:“Any person who receives income (or to whom income accrues) other than a salary, is a provisional taxpayer. A provisional taxpayer is defined in paragraph 1 of the Fourth Schedule of the Income Tax Act, No.58 of 1962, as any-
- person (other than a company) who derives income, other than remuneration or an allowance or advance as mentioned in section 8(1);
- 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;
- body corporates, share block companies or certain associations of persons; and
- persons who are exempt from paying provisional tax, namely:
- Non-resident owners or charterers of ships or aircraft;
- Any natural person who is under the age of 65 and who does not earn any income from carrying on a business – provided that person’s taxable income will not be more than the threshold (R63 556 for 2013 and R67 111 for 2014); or the taxable income of that person (earned from interest, foreign dividends and rental) will not be more than R20 000;
- Any natural person who is 65 years or older – provided that person’s taxable income will not be derived in any way from carrying on any business; will not be more than R120 000; and will not be derived otherwise than from remuneration (such as salary), interest, foreign dividends or property rental.
Examples of income that will make you a provisional taxpayer include rental income, interest income or other income from the carrying on of any trade.
Companies automatically fall into the provisional tax system. There is no formal registration or deregistration needed to be a provisional taxpayer. If a taxpayer is liable for provisional tax, he or she merely needs to request and submit an IRP6 return.”
The timeline for provisional tax is as follows:There are three provisional tax payments; the first is due within six months from the start of the relevant tax year, the second within twelve months and the third within nineteen months if the taxpayer’s year end is 28 February or within eighteen months in any other case. Note that the third return is voluntary and not compulsory. Thus if you are an individual or company with a 28 February year end;
- Your first return is due 31 August
- Your second return is due 28 February
- Your third voluntary return is due 30 September
Visual timeline (example 2014 tax year):01 March 2013 Start of 2014 tax year31 August 2013 First provisional tax return (201401) due28 February 2014 Second provisional tax return (201402) due30 September 2014 Third voluntary provisional tax return (201403) due31 January 2015 Income tax return (2014) due Please contact us if you have any queries or would like us to handle your provisional tax