PROVISIONAL TAX – 2nd RETURN AND INSTALMENT FOR THE 2021 TAX YEAR END
Please be aware that the tax year 2021 second provisional tax return is due and payable by 28 February 2021.
If you have not yet provided us with the supporting documents per the attached explanation, please do so at your earliest convenience.
What is provisional tax? Provisional tax is not a separate tax. It is a method of paying tax due, to ensure the taxpayer does not pay large amounts on assessment, as the tax liability is spread over the relevant year of assessment. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which are based on estimated taxable income. A third payment is optional after the end of the tax year, but before the issuing of the assessment final liability, however, is worked out upon assessment and the payments will be off-set against the liability for normal tax for the applicable year of assessment. https://www.sars.gov.za/TaxTypes/PT/Pages/default.aspx - Extract:
What is it?
Provisional tax is not a separate tax from income tax. It is a method of paying the income tax liability in advance, to ensure that the taxpayer does not remain with a large tax debt on assessment. Provisional tax allows the tax liability to be spread over the relevant year of assessment. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which are based on estimated taxable income. A third payment is optional after the end of the tax year, but before the issuing of the assessment by SARS. On assessment the provisional payments will be off-set against the liability for normal tax for the applicable year of assessment.
Who is a Provisional Taxpayer?
Any person who receives income (or to whom income accrues) other than a salary, is a provisional taxpayer. Most salary earners are therefore non-provisional taxpayers, if they have no other sources of income. It is important to note that receiving exempt income, as follows, does not make you a provisional taxpayer:
If you receive interest of less than R23 800 if you are under 65; or
If you receive interest of less than R34 500 if you are 65 and older or;
You have income in a tax free savings account.
A provisional taxpayer is defined in paragraph 1 of the Fourth Schedule of the Income Tax Act, No.58 of 1962, as any –
natural person who derives income, other than remuneration or an allowance or advance as mentioned in section 8(1) or who derives remuneration from an employer who is not registered for employees’ tax (for example, an embassy is not obligated to register as an employer for employees’ tax purposes)
person who is told by the Commissioner that he or she is a provisional taxpayer.
Excluded from being a provisional taxpayer as defined are any –
approved public benefit organisations or recreational clubs that have been approved by the Commissioner in terms of s30 or s30A;
body corporates, share block companies or certain associations of persons;
Non-resident owners or charterers of ships or aircraft;
Any natural person who does not earn any income from carrying on any business – provided that person’s taxable income will not be more than the tax threshold (for 2021 tax year: for taxpayers below age of 65 - R83 100; age 65 to below 75 - R128 650 and age 75 and over - R143 850); or the taxable income of that person (earned from interest, foreign dividends, rental from letting of fixed property and remuneration from unregistered employer) will not be more than R30 000;
A small business funding entity; and
a deceased estate.
Note: Companies automatically fall into the provisional tax system. 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.
Please be advised that this list is not exhaustive and each individual has a unique tax situation. Should you have any queries regarding your expense claims please feel free to contact us. We would be grateful if you will forward your information at your earliest convenience to avoid a rush towards the end of February.