If you are a business owner, a trustee, or an individual earning income from any other source other than an IRP5, you should have submitted a First Provisional return (IRP6) for 2024 by the 29 February 2024. There are 3 return submissions for Provisional Tax, namely: –
- The First return which covered the estimated income for the tax year, based on the expected taxable income for the period 1 March to 31 August. The deadline to submit your next IRP6 return and make payment is the 31 August 2024. This return is the First IRP6 for the 2025 tax year.
- The Second return which covers the estimated taxable income for the full year, for the period 1 March to 28 February. The deadline to submit this return and make payment is 28 February.
- The Third return is optional, for those who were did not have their final figures or were unable to accurately calculate their February income. This additional top-up payment will avoid being penalized for underestimating your income when you submit you’re annual ITR12 income tax return. This deadline to submit this return and make payment is 30 September.
Provisional tax ensures that businesses and individuals, such as Freelance Artists, Independent Contractors, Sole Proprietors, Landlords or Investors, declare and pay tax on income that hasn’t already been taxed by their employers, pensions, or other sources.
As confusing as it may seem, provisional tax is not a separate tax from income tax. The purpose of Provisional Tax is to benefit those taxpayers with hefty taxation payments due, to allow them to spread these over two or three instalments, instead of a once off payment at the end of the tax year. Upon the assessment of your compulsory annual Income Tax Return (ITR14 for companies or ITR12 for individuals), your provisional tax payments will be off-set against your normal tax liability. If you underpaid, you will need to make an additional payment, including a penalty for underestimating your income, and if you overpaid, a refund, including any interest that was earned on the overpayment, will be due to you.
WHO IS ELIGIBLE?
All businesses or trusts, regardless of size or trading activity must submit a provisional return, even if you are running at a loss. For individuals who earn multiple salaries or income from other sources, then the threshold varies depending on age and tax year. For the 2024 and 2025 tax year (March to February), you don’t need to register for Provisional tax, if your total annual taxable income falls below the following thresholds:
• R 95 750 if you are under 65, or
• R 148 217 if you are older than 65 and younger than 75; or
• R 165 689 if you 75 and older
Additionally, you only need to register for provisional tax if those other sources of income, exceed R30,000 for the year. Neglecting to file your Provisional return before SARS deadlines can have serious consequences and can lead to Penalty fines of R250 to R16 000 for both trading and inactive companies. Your business also runs the risk of becoming non-tax compliant, which means you will not be able to apply for new tenders, contracts or loans.
Provisional tax is a critical aspect of financial responsibility for businesses and individuals. Understanding your obligations, registration requirements, and payment deadlines is essential to avoid penalties and ensure compliance with tax regulations.
Dirmeik Consulting provides comprehensive tax services and can help you to correctly navigate your Provisional Tax obligations to keep you tax compliant. To find out how we can assist you to maximize your financial well-being or to set up a consultation with us, contact us here.
