WHAT IS PROVISIONAL TAX AND HOW DO I TAKE CARE OF IT?

provisional tax

Provisional tax refers to the paying of tax liabilities in advance. It is not separate from one’s income tax, but is only required from the following individuals or organisations:
  • Any individual who receives an income other than their salary
  • An employee who receives a salary from an employer who is not registered for employees’ tax
  • Any company
  • Any person classified as a provisional taxpayer by SARS

By allowing provisional taxpayers to pay in advance, the taxpayer does not find themselves with a large tax debt at the end of the tax year, or during assessment. With provisional tax, tax liabilities can be spread across the year, and taxpayers can pay in advance (at least two amounts).

All companies in South Africa automatically fall into the category of provisional taxpayers. Amounts due are calculated by taking the estimated taxable income into account for the specific year of assessment.

MMS Cloud Accounting can assist your company to handle your provisional tax payments to ensure total taxation compliance for your business. Our standard accounting packages include taxation services to address submission requirements as well as client services that remind you of upcoming taxation deadlines. To see our accounting packages, click here.

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    HOW & WHEN SHOULD PROVISIONAL TAX BE PAID?

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    The amount payable by the provisional taxpayer is determined as follows:
    1st period:
    • Half of the total estimated annual tax;
    • Minus the employees’ tax for these 6 months;
    • Minus any allowable foreign tax credits for these 6 months.
    2nd period:
    • The total estimated annual tax;
    • Minus the employees’ taxes paid for the entire year;
    • Minus any allowable foreign tax credits for the entire year;
    • Minus the amount paid during the first provisional period.
    The 3rd period is optional and applicable in certain cases only as a form of top-up, and is calculated as follows:
    • The total tax estimated payable for the year;
    • Minus the employees’ tax paid;
    • Minus any allowable foreign tax credits;
    • Minus the amount paid for the 1st and 2nd provisional tax periods.
    According to SARS regulations, the first provisional tax payment should be made within 6 months of the start of the year of assessment. If you would like to make use of our professional tax services to ensure that you do not miss any of your payment deadlines, you are welcome to get in touch.