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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 its relating 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. You will however, have to activate this tax type on e-Filing using your income tax number in order to start submitting these returns to SARS.

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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 become non-compliant. This will directly affect their tax compliance status with SARS which can negatively impact trade.

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 if your financial year end is February.

The second payment:

It is due no later than the last working day of the year of assessment. This will be 28/29 February if your business’s financial year is February.

The third, voluntary payment:

The third payment may be made within six months of the year of assessment.

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How do I submit my IRP6?

There are various ways to submit your provisional tax (IRP6) return. We’ve added them below:

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 e-Filing system:

You can submit your IRP6 on the e-Filing system. This will require you to register an e-Filing profile and activate your registered tax types. If you have an existing e-Filing 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 e-Filing 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.

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Disclaimer: This post may contain affiliate links. Please read our affiliate disclaimer here. Additionally, this post offers general information. Consult a professional – like an exceptional member of our team – for assistance before submitting.

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