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What is Provisional Tax?

Posted 6 January 2012 under Tax Questions



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So as we are getting closer to Provisional Tax Season the question on taxpayer’s minds is, do I qualify as a provisional taxpayer? The Income Tax Act sets out specifics as to who qualifies and who doesn’t.

If you are a salaried employee then your employer will deduct a monthly amount and pay it over to SARS on your behalf. You will only have to file one tax return at the end of tax season.

Otherwise you may qualify as a provisional taxpayer and will have to submit a return twice a year. You will also have to make at least two tax payments to SARS depending on your taxable income. Payments are made at the end of February and August to avoid penalties. This can become really complicated to work out (Look out for new features from TaxTim as to how to calculate this payment – coming soon).

SARS wants to take in as much money as it can regularly and so a bi-annual payment is required. Unfortunately this means that you as a taxpayer have to couch up twice a year. In order to avoid being a provisional taxpayer check if the exemptions below apply to YOU.

Basically if you are a normal salaried employee or receive allowances from an employer you do NOT qualify and therefore don’t have to worry about filing provisional tax returns.

The good news is that there are further exemptions from provisional tax filing as well for taxpayers who aren’t salaried employers.
• If you are under 65 years old and you earn income from Interest, Dividends and Rental which is less than R30 000 for the tax year;
• If you are under 65 years old and your taxable income does not exceed the taxable threshold which is currently at R75 000 for the tax year; and

If any of these exemptions apply to you then Hurrah! No provisional tax return filing!

NEW FEATURE (Dec 2012):
Answer a couple of questions from Tim to find out if you must register for provisional tax.

Additional resources:  What is Provisional Tax? How and When?

 

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Jon says:
10 January 2012 at 9:56

Useful stuff, thanks! Could you do a followup on what's required to register as a provisional taxpayer, what documents need to be kept for filing, etc? Will TaxTim be expanded to handle provisional tax returns?


TaxTimTaxTim says:
10 January 2012 at 11:51

Hi Jon,

Thank you for your comment.

If you go to https://www.taxtim.com/za/help/get-a-tax-number there are easy step by step instructions on how to register and you can download the registration form as well.

For filing purposes you will need to keep all your documents which reflect any income earned and expenses incurred as well as any medical certificates, donations certificates, car logbook and interest earned certificates received from the bank. These are the most common examples. Although you don't need to submit these documents unless audited, it is always a good idea to keep them around just in case.

Yes TaxTim will be able to do your provisional tax return. Look out in the next few weeks for this latest feature, just in time for filing deadline!

Also sign up for our newsletter to receive our latest news.

Hope this helps.

Regards,
Tim


Review says:
30 January 2012 at 5:47

Cool blog,looking to communicate


TaxTimTaxTim says:
30 January 2012 at 15:46

Thanks very much for the post.

Contact us on our helpdesk for further communication or follow us on twitter, facebook, google+ and all our blog posts!


Melz says:
7 February 2012 at 10:39

Hi Tim :) If you are under 65 years, is the requirement that your "income" or your "taxable income" from interest, dividends and rentals needs to be below R 20 000 to be exempt from provisional tax filing?
Eg- say you are a normal salaried employee but also earn interest income during the tax year of say R 30 000 (from investments, etc). After the interest exemption, taxable income (relating to the interest) would be below R 20 000. So then would you need to register or not?
Thanks, Mel


TaxTimTaxTim says:
7 February 2012 at 12:38

Hi Mel,

Thanks for the question. SARS requires the R20 000 threshold to be based on taxable income. So if you are below this threshold you would not need to register for provisional tax.

I hope this answers your question? Keep them coming!

Regards,
Tim


Melz says:
7 February 2012 at 15:45

Thanks Tim! So in my example as above the taxpayer wouldn't need to register for provisional tax (as although gross interest income is above R 20 000, the taxable interest income is below R 20 000 after the annual interest exemption)? Thanks so much! Mel


TaxTimTaxTim says:
8 February 2012 at 8:46

Hi Mel,

Yes that is correct, the annual exemption of R22 800 would be applied to the Gross Income earned thereby reducing the Taxable Income to below R20 000 making it unnecessary to register for provisional tax.

Regards,
Tim


Melz says:
8 February 2012 at 13:00

Wonderful, thanks for the help Tim! :)


tania says:
15 February 2012 at 9:10

Hi if I earn a salary every month for which is pay tax which amount to more than the stipulated amount and then also earn additional income per month, will i need to pay tax on the difference on my provisional tax return?


TaxTimTaxTim says:
15 February 2012 at 12:17

Dear Tania,

Thank you for your question

Just to understand, you earn a salary each month from your employer for which PAYE is deducted before the amount ends up in your bank account? You also then earn some additional income, what percentage is this in comparison to your salary and what is the additional income for? Finally are you registered for provisional tax?

Regards,
Tim


TaxTimTaxTim says:
15 February 2012 at 12:17

Always a pleasure Mel!

Regards,
Tim


TaxTimTaxTim says:
21 February 2012 at 12:57

Thank you Lydia, always appreciated.

Are you signed up for our newsletter? It contains exciting tips and announcements.

Regards,
Tim


Ben Lewies says:
3 October 2012 at 0:05

Hi Tim

I have a property from which I earn a rental income. I pay monthly levies and a monthly morgage on the property. My net rental income falls below the R20 000 threshold.

I am also the director of a dormant company (dormant during the tax period and recently deregistered).

I have the following questions:
1. Do I need to be registered for provisional tax?
2. Do I need to declare that I am the director of a company on my ITR12, or does that only apply if the company is active?


Regards


TaxTimTaxTim says:
3 October 2012 at 8:57

Hi Ben,

Thank you for the question!

You do not need to register as a provisional taxpayer as your taxable income from rentals falls below the threshold of R20 000. Unless you have other income such as interest or royalties that take this above the threshold? Although at the time of completing your 2012 income tax return you were a director of a company there is an obligation to declare this, given the company is not active it may not be necessary to complete this section. Although for full disclosure it is required.

Regards,
Tim


Ben Lewies says:
16 October 2012 at 15:58

Thank you, Tim. Appreciate the straightforward answer.


Regards,
Ben


TaxTimTaxTim says:
17 October 2012 at 0:52

Hi Ben,

Only a pleasure!

Regards,
Tim


Nigel says:
24 October 2012 at 12:23

Hi Tim,

I am so pleased I found your website!

I am a non-resident registered with SARS and earning rental income since December 2010 above the 20k threshold. I visited SARS for assistance with completing and submitting my 2011 return and am in the midst of doing my 2012 return via eFiling. However, I noticed from your blog that I should be a provisional taxpayer which I don't think I am! Also, the SARS consultant did not ask my marital status and put me down as not married when I am married in community of property. How will these two issues affect me and how can I sort it out?!

Also I noticed when trying out your tax return questionnaire (which is really helpful compared to doing it alone on eFiling!) that I was not asked whether I was resident in SA or not and also there were no questions about assets and liabilities, which as a property owner could affect my tax.

I appreciate your help.

Nigel


TaxTimTaxTim says:
25 October 2012 at 20:45

Hi Nigel,

Thanks very much for the question!

Firstly as a non-resident you are only taxable on your income earned from a South African source. In a case like yours your assets and liabilities would not affect your tax position in South Africa and unless you sold property you had in South Africa, wouldn't need to be disclosed. Unless you are over the age of 65 and this is your only SA income you will need to file a provisional returns for each year. I am surprised the SARS official didn't tell you as much. Unless your spouse is a taxpayer in South Africa and co-owns the property and pays tax on it then it won't matter if the married in community of property box is ticked as you will suffer the entire tax liability.

I hope that helps you, please if you have any further questions do not hesitate to ask.

Regards,
Tim


Nigel says:
26 October 2012 at 16:46

Thanks for your reply, Tim.

My wife is not a registered taxpayer in SA but she does co-own the property.

On my ITA34 for tax year 2011, during which I declared the sale of a property in order to pay CGT (the reason I registered with SARS in the first place), I noticed this paragraph:

"Please note that in terms of a special dispensation, taxpayers who earn below R120 000 annual income (total salary income before tax) and who meet the following criteria are no longer required to submit tax returns:
Only one IRP5
No additional income
No deductions for which they wish to claim
According to the information you declared in your income tax return, you were not required to submit a tax return for this year of assessment. In future, kindly note that should your tax circumstances not change and you still meet these criteria you are not obliged to submit a return and can rest easy knowing you have met all your income tax obligations!"

So I guess now that I have settled my CGT obligations, I don't need to worry any further with SARS as the rental income is less than R120k!

Regards,
Nigel


TaxTimTaxTim says:
27 October 2012 at 16:04

Hi Nigel,

That paragraph only applies to full time salaried employees for the threshold and in the case of the CGT if you sold the property for less than R2m then no CGT would have been payable, was this the case? May I ask if you had earned any rental income that year? If you had not, than based on your return only being for CGT then it would automatically produce that paragraph based on the information submitted. So you would still need to submit a return each year as the R120 000 only applies to a salary with no further income.

Regards,
Tim


Nigel says:
30 October 2012 at 12:28

Hi Tim
Thanks for clarifying. My CGT and tax on rental income for that year came to R11.65 :)
I will still submit returns as you suggest.
Many thanks.
Nigel


TaxTimTaxTim says:
31 October 2012 at 18:23

Hi Nigel,

That's always a good story when the amount is small! I definitely suggest filing then to avoid penalties which are more than the actual tax liability!

Regards,
Tim


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