Failure to pay provisional tax could result in these penalties:
Is there a way to avoid provisional tax penalties?
Yes. There could be a way out.
Here's how to avoid provisional tax penalties
The bad news is you can't escape the penalties altogether. But you can shrink the interest charges by using this lifeline SARS has given you – the voluntary third payment, says the Practical Tax Loose Leaf Service.
When it comes to provisional tax, you must pay half of the estimated tax liability with the first return. You pay the rest on the second return and if you need to 'top-up' your payment, you'll make a third payment. This is your lifeline.
Because the third provisional tax payment is voluntary, SARS doesn't issue returns for the third payment (IRP6 (3) anymore. This means that if you want to make a third payment, simply make the payment to SARS and they'll add this to your provisional tax account.
How to qualify for SARS' voluntary third payment lifeline
Not everybody can take advantage of the third provisional payment. Individuals and trusts must have an income of R50 000 or more to use this third payment. Companies and CCs must have an income of R20 000 or more.
If you qualify to take advantage of the third payment, make sure you're familiar with the payment deadlines. And if you don't qualify, make sure you pay on time to avoid penalties.