Income tax and provisional tax: Are they the same?

Income tax
Provisional tax is a method of fulfilling income tax liabilities ahead of time to mitigate the possibility of large tax debts. As a result, provisional tax is not seen as separate from income tax but rather a partner thereof. Provisional taxpayers must make two payments in advance based on their estimated taxable income, which allows them to spread their tax liability over the year of assessment rather than being liable for it all at once.

Only two payments are mandatory. However, taxpayers can opt to make an additional third payment before issuing the SARS assessment. During this assessment, all provisional payments are offset by the normal tax liability for the year in question.

Who pays provisional tax?

All companies are automatically required to make use of the provisional tax system. SARS has made amendments to remove the registration and deregistration process previously required for provisional taxpayers, making it the taxpayer’s responsibility to determine whether they are liable for this tax.

Determining your liability

Provisional taxpayers must request and submit IRP6 returns via the SARS eFiling platform. In order to establish how much provisional tax you are liable for, taxpayers are expected to work out how much tax would be payable based on their taxable income for the year of assessment.

The first period (mandatory)
  • Half of the total estimated tax for the year of assessment;
  • Less the employees’ tax for this period;
  • Less foreign tax credits for this period.
The second period (mandatory)
  • The total estimated tax for the year of assessment;
  • Less the employees’ tax paid for the entire year;
  • Less foreign tax credits for the entire year;
  • Less the amount paid in the first period.
The third period (voluntary)
  • The total estimated tax payable for the year of assessment;
  • Less the employees’ tax paid for the year;
  • Less foreign tax credits for the year;
  • Less the amount paid in the first and second provisional periods.

How to meet provisional tax obligations:

Taxpayers must register for eFiling to fulfil their provisional tax obligations. eFiling is the online platform created by SARS for individuals to easily handle their tax matters. Once registered, taxpayers can request an IRP6 return and easily complete their submissions online. If you are already registered on the eFiling system, provisional tax can be added to your profile to access and file the IRP6 return. 

The next due date for annual return submissions for provisional taxpayers is the 31st of January 2023. The tax specialists at MMS Cloud Accounting can assist in ensuring the accuracy and efficiency of your income tax return to avoid non-compliance. If you require assistance or clarity on this process, feel free to reach out to us.
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