PROVISIONAL TAX: WHAT IS IT AND HOW IT WORKS

 

Article by: Rosebank Accountant: Vincent Motsi

What is Provisional Tax?

Provisional tax is a method of paying tax in advance to avoid large payments at the end of the assessment year. It's not a separate tax but a way to spread tax liability throughout the year. Taxpayers are required to make at least two advance payments based on estimated taxable income, with an optional third payment.

Who Needs to Pay Provisional Tax?

Provisional tax applies to individuals and entities receiving income other than a salary. This includes:

• Natural persons with non-remuneration income.
• Companies.
• Individuals designated as provisional taxpayers by the Commissioner.

Who is Excluded?

• Natural persons without business income and whose taxable income are below the tax threshold.
• Individuals with taxable income from interest, foreign dividends, and rental not exceeding R30,000.

Payment Deadlines

• First Payment (IRP6/1): Within six months of the assessment year's start (31 August) or six months after the financial year-end date.
• Second Payment (IRP6/2): By the last working day of the assessment year (28/29 February).
• Optional Third Payment:
- Within seven months for a February year-end (30 September).
- Within six months for other year-end dates.

At SME.TAX we do more than just assist clients with tax planning, we are your “one-stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring

For more information, please visit our website www.sme.tax or give us a call on 012 021 0829