Provisional tax is a tax system used in South Africa to collect tax revenue from self-employed individuals and companies whose income is not subject to PAYE (Pay As You Earn) tax deductions.
Unlike PAYE, which is deducted automatically from an employee’s salary by their employer, provisional tax payments are made by the taxpayer themselves, directly to the South African Revenue Service (SARS).
In this article, we’ll provide an overview of the provisional tax system in South Africa, including when it needs to be paid, who is responsible for paying it, and how to make payments to SARS.
What is Provisional Tax?
Provisional tax is a system of tax payments made by self-employed individuals and companies whose income is not subject to PAYE tax deductions.
The system requires taxpayers to estimate their taxable income for the year and make two or three advance payments of tax, depending on the taxpayer’s tax year-end.
The payments are made every six months, with the first payment due by the end of August and the second payment due by the end of February.
The purpose of provisional tax is to ensure that taxpayers meet their tax obligations throughout the year, rather than waiting until the end of the tax year to pay their tax liability in full.
When Does Provisional Tax Need to be Paid?
Provisional tax payments are due twice a year, with the first payment due by the end of August and the second payment due by the end of February.
If a taxpayer has a February year-end, they will only be required to make one provisional tax payment, which is due by the end of September.
Provisional tax is not an additional tax, but rather an advance payment of income tax. The amount of provisional tax paid is offset against the final income tax liability for the tax year.
Who Pays Provisional Tax in South Africa?
Provisional tax is paid by self-employed individuals and companies whose income is not subject to PAYE tax deductions. This includes freelancers, sole proprietors, and small businesses.
Taxpayers earning less than R30,000 per year are not required to pay provisional tax. However, if a taxpayer earns more than the said amount annually, they are required by government to pay provisional tax.
How to Pay Provisional Tax to SARS
Provisional tax payments can be made to SARS via various channels, including eFiling, the SARS MobiApp, and at a SARS branch. Here are the steps to follow when making a provisional tax payment:
- Log in to your eFiling account, SARS MobiApp, or visit a SARS branch.
- Navigate to the provisional tax payment section.
- Enter the estimated taxable income for the tax year.
- The system will calculate the provisional tax due.
- Choose the payment method that suits you, such as debit order, electronic funds transfer (EFT), or credit card payment.
- Follow the prompts to complete the payment process.
If a taxpayer fails to make a provisional tax payment on time, they will be subject to penalties and interest. Therefore, it’s crucial to make the payments on or before the due dates to avoid any penalties.