What Is Provisional Tax
What Is Provisional Tax? Simple Guide
No. Provisional tax is prepayment of income tax. VAT is a separate consumption tax on goods and services. You may need to register for both if you run a business.
What Is Provisional Tax
Provisional tax is a prepayment system for income tax. Instead of paying all your tax at once after filing your annual return, you make two advance payments during the year. This applies to anyone who earns income that is not subject to PAYE deductions.
When you file your final ITR12 tax return, the provisional tax you already paid is credited against your total tax liability. If you overpaid, you get a refund. If you underpaid, you owe the difference.
Who Must Register for Provisional Tax
You must register if you earn non-salary income exceeding R30,000 per year from:
– Freelancing or consulting
– Rental property
– Interest, dividends, or capital gains above exemptions
– Business or trading income
– Foreign income
All companies, close corporations, and trusts are automatically provisional taxpayers regardless of income level.
Provisional Tax Payment Deadlines
First payment (IRP6): 31 August – half your estimated annual tax
Second payment (IRP6): 28/29 February – balance of your estimated tax
Third payment (optional): 30 September – voluntary top-up to avoid interest
Payments are made via SARS eFiling using the IRP6 form. You estimate your taxable income, and SARS calculates the tax due automatically.
Penalties for Late or Underpayment
Late payment: 10% penalty plus interest
Underestimation: 20% penalty on the shortfall if your estimate was too low
Non-payment: SARS can take legal action for persistent non-compliance
It is better to slightly overestimate your tax than underestimate it. SARS refunds overpayments with interest.
Frequently Asked Questions
Is provisional tax the same as VAT?
No. Provisional tax is prepayment of income tax. VAT is a separate consumption tax on goods and services. You may need to register for both if you run a business.
What if my income drops during the year?
You can reduce your second provisional payment to reflect lower income. However, reducing it too much may trigger underestimation penalties if you end up underpaying.
Can I get a refund if I overpay provisional tax?
Yes. When you file your final ITR12, SARS calculates the difference. Overpayments are refunded with interest, usually within 2-4 months for verified taxpayers.
Do I still file an ITR12 if I pay provisional tax?
Yes. Provisional tax is a payment mechanism, not a replacement for your annual tax return. You must file ITR12 to reconcile your provisional payments against your actual tax liability.
How do I register for provisional tax?
Log into SARS eFiling, go to Home > Tax Types > Manage Tax Types, and add Provisional Tax (IRP6). Activation takes 24-48 hours. Alternatively, visit a SARS branch.
Need Help With Your Tax?
Admin Boss is a registered tax practice with over 20 years of experience helping South African individuals and businesses navigate SARS.
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