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Who is a provisional taxpayer?

by , 07 November 2016
Who is a provisional taxpayer?Provisional tax is a tax system that makes taxpayers estimate and pay their taxes in the form of two payments (one every six months), instead of having to pay one large sum at the end of the tax year. But, do you know who SARS considers a provisional taxpayer? Read on to find out if you qualify.

It's important you determine if you qualify as a provisional taxpayer.

The reason?

SARS no longer registers you automatically; you have to register for provisional tax yourself.

The only time SARS will register you automatically is if at the time of assessment, they find that during the tax year you were liable for provisional tax. But at this point it'll be too late and SARS'll hit you with penalties and interest.

Fortunately, you can avoid this.

So who is considered a provisional taxpayer by SARS?

The Practical Tax Loose Leaf Service explains that you'll be considered a provisional taxpayer by SARS if one or more of the following criteria apply to you as a natural person (individual taxpayer):

If you're under 65 years old and you:
 

  1. Earn taxable income other than remuneration if your taxable income exceeds the tax threshold;
  2. Carry on a trade (for example, running a stall at the weekend market); and
  3. Earn more than R20 000 taxable income from renting out a fixed property, local interest, foreign interest and foreign dividends.

Companies and Close corporations: All companies and close corporations are automatically provisional taxpayers.

There are two tiers of provisional taxpayers.

  • Tier one. Taxpayers with a taxable income less than R1m; and
  • Tier two. Taxpayer's taxable income greater that R1m.

Let's look at each of these in more detail.

#1: Tier one provisional taxpayer: If you're a tier one provisional taxpayer, you must ensure your estimated tax due is within 90% of the final tax assessed by SARS. This means you have a 10% leeway of the final tax payable to be wrong.

For example, you estimate your final tax is R95 000, and you pay this as provisional tax. On assessment, you actually owe SARS R100 000. You're still within the 10% leeway, so you shouldn't be penalised for under-estimation.

#2: Tier two provisional taxpayer: If you're a tier two provisional taxpayer, you must ensure your estimated tax due is within 80% of the actual final tax assessed by SARS. You'll have a 20%leeway to be wrong.

When must you pay provisional tax?

  • Your first payment is due by 31 August or six months after the approved year-end date;
  • Your second payment is due by 28 February of the following year, or on the approved year-end date; and
  • Your third payment (a voluntary top-up payment) is due by 30 September, or six months after the approved year-end date.

Remember, provisional tax isn't an additional tax. It's just another way to settle your tax liability. This ensures SARS receives a regular stream of tax. Make sure you comply if you tick all the boxes.

PS. We recommend you check out: Provisional Tax 101. It gives you the step-by-step advice you need to estimate, calculate and pay over your provisional tax correctly  - yourself!



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Comments
1 comments


Dominic 2014-05-20 13:42:45

Quite a pain for people who take on adhoc freelance work. It is as though the government wants to make it difficult to become economically active.

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