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Small Business

Provisional Tax and Your Small Business

What is provisional tax?

Provisional tax is a method created by SARS to help relieve the pressure of making one large payment at the end of your relevant year of assessment. This system requires the taxpayers to pay at least two amounts in advance during the year of assessment. At the time of submission of each return, there will be no historic data to base the calculations on. They will be calculated based on estimated taxable income (what your taxable income is predicted to be at the end its relevant year of assessment). Once your income tax return has been submitted, all the provisional tax payments that have been made to SARS will be offset against your final assessed amount.

Provisional tax shares a tax number with Income Tax. This means that no separate registration is necessary should you be required to submit provisional tax returns.

Who is required to submit a provisional tax return?

For individuals:

If you earn an income other than your regular salary or an allowance, you must register as a provisional taxpayer. Should you be a “one-man band” sole proprietor who does not employ any staff, you will need to submit these returns as well.

For companies:

Companies are automatically added to the provisional tax system and are liable to submit these returns or face non-compliance for this tax type. This will directly affect their Tax Compliance Status with SARS, which can negatively impact trade.

As quoted from SARS:

There is no longer a registration or deregistration process to be a provisional taxpayer. The onus is on the taxpayer to determine if he/ or she is liable for provisional tax, and to request and submit an IRP6 return via eFiling.

Note: Some entities (natural and judicial) have been excluded from this tax system. Read about them here >>.

When are provisional tax returns due?

Provisional tax is mandatory for payment twice a year, with a third voluntary payment as follows:

The first payment:

This payment must be made within six months of the start of the year of assessment. For years of assessment starting March, this will be 31 August.

The second payment:

It is due no later than the last working day of the year of assessment. This will be 28/29 February.

The third, voluntary payment:

The third payment may be made within six months of the year of assessment, in any other case.

As quoted from SARS:

Remember that, by submitting the return and payment timeously and accurately, you can ensure a hassle-free, smooth submission. Insufficient payment and/or underestimation of taxable income may lead to you being charged with penalties and interest.

How do I submit my IRP6?

There are various ways to submit your provisional tax (IRP6) return.

Submitting at a SARS branch:

You can go into a SARS branch where a SARS consultant will assist you with the submission of your provisional tax return.

Using the eFiling system:

You can submit your IRP6 on the eFiling system. This will require you to register an eFiling profile and activate your registered tax types. If you have an existing eFiling profile, but have never been required to submit an IRP6 before, you will need to activate this tax type on your profile using your Income Tax number.

Hiring a Tax Professional:

A Tax Professional will calculate your amount payable and submit the IRP6 on your behalf. They may (depending on their in-house policies) also send a payment instruction to your registered bank account that will include all the correct, relevant payment details as generated by the eFiling system. Once it has been sent to your bank, you will be able to review the payment and release it, making the entire process much less stressful for the taxpayer.

Do you need some assistance with your Provisional Tax submission? Click here >> to book a discovery consultation and find out why we’re fast becoming the preferred accounting, taxation and secretarial service provider for many small businesses across South Africa.

This post may contain affiliate links. Please read our affiliate disclaimer here.

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Magdalene van der Walt

Magdalene is TBB's founder and small business specialist. She is a certified accountant, Sage Business Cloud adviser, approved CIPC service provider and serial entrepreneur. Her mission is to empower small business owners by equipping them with the tools that they need to succeed in business.

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