Provisional tax is not a special separate type of tax but simply a mechanism to pay your taxes during the tax year instead of having a large amount due to SARS on assessment when you submit your Income Tax return (ITR12).
Provisional tax is paid by individuals who earn income other than a salary / traditional remuneration paid by an employer. This is because they don't pay tax via PAYE, like salaried employees.
Provisional taxpayers are required to submit two provisional tax returns (IRP6) during the tax year and make the necessary payment to SARS if a payment is due on the return. The first provisional tax return must be submitted within the first 6 months of the year and the second provisional tax return at the end of the year of assessment. There's also an option to make a third provisional (top-up) payment before submitting your income tax return (ITR12) for that tax year.
Therefore, the deadlines for the tax year is:
2023 Tax year
2022 Tax year
|1st Provisional tax return||2022/08/31||2021/08/31|
|2nd Provisional tax return||2023/02/28||2022/02/28|
|Top-up payment (Optional)||2023/09/29||2022/09/30|
|Income tax return||2024/01/31||2023/01/31|
If you ONLY earn a salary / remuneration on which PAYE is deducted, you are a non-provisional taxpayer and don't have to worry about filling provisional tax returns. Non-provisional taxpayers make their contributions to SARS via PAYE deducted off their paycheck and only have to submit an income tax return (ITR12) for each tax year.
Provisional taxpayers are people who earn income other than a salary / remuneration on which no income tax has been deducted/withheld. They will need to declare their total estimate taxable income on their provisional tax returns (IRP6) and pay the applicable tax thereon.
If you earn any of the following income, you may be a provisional taxpayer even if you also earn a salary:
The above may classify you as a provisional taxpayer, but there are some exceptions and thresholds which apply:
If you earn income from freelancing or running your own business and your total taxable income is above the tax threshold, then you will be a provisional taxpayer.
If you do not earn income from running your own business, but your total taxable income from interest, dividends and rental income is greater than R 30 000 per year, and your total taxable income is greater than the tax threshold, then you will be a provisional taxpayer.
The tax thresholds for the 2023 tax year are:
Click here to find out if you must register as provisional taxpayer.
You can follow the next few step to register for provisional tax:
You can follow the next few steps to request the IRP6 return on SARS eFiling:
**Important: You are filing a return for the tax year you are currently in, the one that ends in the coming month of February.
For example, if filing for period 01 in August of 2022, you will select 2022-02 (the 2023 tax year).
Alternatively, click here to get step-by-step help from TaxTim!
Particulars of Taxpayer - will already be completed. Check to ensure that these are still correct.
Period - ensure that the correct period is checked - for example, first period for the 2023 tax year is due 31 August 2022 and the second period is due 28 February 2023.
Turnover - Total gross income received before exemptions and deductions.
Estimated taxable income - all your income minus the business-related expenses incurred in earning that income. Also subtract any pension fund, retirement annuity fund contributions, donation deductions and any exempt income.
Tax on estimated taxable income - this amount will automatically calculate.
Less: Primary, secondary and tertiary rebates (for individuals only) - depending on your age, this amount will already appear on the return.
Less: Medical scheme fees (for individuals only) - this is a credit that goes toward providing relief if you or your employer pay for a private medical scheme. For the 2023 tax year this amounts to R 347 per month for the first two members each and R 234 per month for every member after that. For the 2022 tax year this amount was also R 332 per month for the first two members each and R 224 per month for every member thereafter. See our medical aid credits calculator.
Less: Additional medical expenses (for individuals only) - if your medical aid costs exceed 4x the above medical credit (3x if you are over 65) then a portion of your costs PLUS Out of Pocket Medical expenses can be claimed here as a credit. Please refer to our Medical Expense Tax Guide for more information.
Tax for the full year - will automatically calculate based on the tax tables.
Tax for this period - this amount will automatically calculate and will be divided in two for the first period.
Less: Employees tax for this period - add up all the employee tax you paid from all your pay slips. Only add the PAYE on your salary, don’t include PAYE on Lump Sums, UIF or SDL.
Less: Foreign tax credits for this period - if you earned money from overseas and any tax was withheld or paid, include that amount here.
Less: Provisional tax paid for 1st period - You will need to enter the amount that you have paid for the first provisional tax return. Only applicable for the second provisional tax return.
Tax payable for this period - this amount will automatically calculate.
Add: Penalty outstanding from 1st period - You will need to enter the penalty amount if a penalty was raised on your first provisional tax return, only applicable to the second provisional tax return.
Add: Interest outstanding from 1st period - You will need to enter the interest amount if interest was raised on your first provisional tax return, only applicable to the second provisional tax return.
Amount payable - this amount will automatically calculate.
Add: Penalty on late payment - this amount will automatically calculate.
Add: Interest on late payment - this amount will automatically calculate.
Total Amount Payable - this amount will automatically calculate.
Unusual/Infrequent amounts - this is the income that you do not normally earn. For example, capital gains and lump sums.
Historical information - this will already be completed, based on your previous year's income.
Payment detail - provides you with the payment reference number and beneficiary ID.
One payment must be made by end of August (mid tax year)
A second payment must be made by end of February (end of tax year)
*Optional* third payment can be made at end of September (seven months after the tax year closes) ONLY if the amount paid in previous payments was insufficient.
SARS wants provisional taxpayers to have an even cash flow and avoid paying one large (potentially crippling) chunk of tax in February, so they ask that two (or optionally three) payments are made during the tax year (at the end of August and end of February), with an IRP6 required for each one.
The tax paid from the first and second payments is then taken off any tax owing at the end of tax season, and can be refunded by SARS if too much was paid. This will happen when you submit your ITR12 to SARS for assessment.
Provisional taxpayers also need to submit an ITR12 tax return (just like regular/non-provisional taxpayers), except the due date for this is 31 January the following year (11 months after the tax season closed).
Provisional taxpayers – those who earn income from sources other than, or in addition to a regular salary or traditional payment from an employer – are all too familiar with the process of estimating their taxable income and submitting provisional tax returns. They don’t just do this once, but twice a year!
We know it’s a bit painful (although TaxTim makes it super easy) but it’s very necessary if you don't want to be lumped with penalties from SARS.
Let's take a look at the most common penalties provisional taxpayers face, plus how to avoid them.
Late payments have a penalty of 10% applied on the total tax amount payable, and will be levied for either or both payment periods (August and February). SARS will also add on interest at their prescribed rate - currently 10% per annum.
SARS is exceptionally quick to apply these fines - even if you're only a few days late - so be sure to mark these deadlines down in your calendar (or sign up to receive our email reminders), so that you never miss these dates of end August and end February.
It is importnt to note, if the deadline falls over a weekend or on a public holiday, the payment must be made at the latest on the last working day before the weekend/public holiday.
A unique part of paying provisional tax is the need to estimate your annual taxable income. To prevent people from pulling these figures out of the air, or reporting lower numbers, SARS imposes hefty fines if you underestimate.
The penalty amount is different for taxpayers whose taxable income is more than R1 million compared to those earning less than R1 million. Let’s look at each in more detail.
Taxable Income of R 1 Million or Less
If your taxable income for the year is R 1 million or less, you're at risk for an under-estimation penalty if your estimate in your second provisional return is less than 90% of your actual annual taxable income on your ITR12, and is also less than your 'basic' amount. Your 'basic' amount is your taxable income on your most recent assessment.
The penalty amount will be calculated at 20% of the difference between the normal tax payable on your estimate and the lesser of:
Here’s an example.
Thabo is a provisional taxpayer and he needs to submit his second provisional tax return for the 2023 tax year of assessment (March 2022 to 28 February 2023).
His 'basic' amount per his 2022 Tax Assessment (ITA34) is R 300 000. Because Thabo has recently gone overseas on holiday, his cash flow is a bit tight in February and he hasn't budgeted properly for the tax payment he’ll need to make. So, he thinks it would be a good idea to understate his taxable income a little so he can reduce his tax bill in February. He therefore completes and submits his second provisional return in February 2023 with a taxable income amount of R 200 000.
In August 2023, Thabo completes his 2023 tax return (ITR12) and receives his Tax Assessment (ITA34) which puts his actual taxable income at R 255 000 for the year.
His estimate of R 200 000 was less than 90% of actual taxable income (90% x R 255 000 = R 229 500) and also less than his 'basic' of R 300 000. Unfortunately, Thabo didn’t know the rules around provisional tax estimates, so by trying to reduce his tax burden in the short term, he's actually going to be penalised by SARS.
His penalty is calculated like this:
The lesser amount of tax is R 25 165, so SARS will use this amount in the penalty calculation.
Total tax paid (first plus second provisional tax payments) = R 19 575 (Use our handy income tax calculator to work out your tax obligation)
Calculation of penalty = R 25 165 - R 19 575 = R 5 590
Penalty amount = 20% of R 5 590 = R 1 118.00
Taxable Income Greater Than R 1 million
If your taxable income is more than R 1 million, you must make sure that your estimate of taxable income on your second provisional return is no less than 80% of your actual taxable income. SARS don't consider the 'basic' amount when a taxpayer's taxable income is more than R1 million.
The penalty will be calculated at 20% of the difference between the normal tax payable for your estimate and tax calculated on 80% your actual taxable income.
Here’s another example to help us work this out.
Beth is a provisional taxpayer and so she's required to submit her second provisional tax return in February 2023.
She's been busy and distracted as she's been setting up a new store for her business and her accountant, who normally prepares her provisional return, has gone on leave. To make it even more stressful, she hasn’t had time to review the February management accounts for her business yet either. Because she’s short on time, she decides to give a rough estimate of her taxable income but it's on the low side, because she intends to top up the underpayment when she files her annual tax return.
She imagines a taxable income of R 1 200 000 is a reasonable estimate, so she adds it to her second provisional return and submits in February 2023. However, when August 2023 comes around, she completes her Income Tax Return (ITR12) and receives her Tax Assessment (ITA34), which reflects her actual taxable income of R 1 600 000 for the year - and a penalty of R 6 560.
Because Beth was not aware of the risk of under-estimating her actual taxable income, her estimate of R 1 200 000 was less than 80% of her actual taxable income of R 1 600 000 (80% x R 1 600 000 = R 1 280 000). SARS calculated her penalty like this:
Tax on 80% of actual taxable income (R 1 280 000) = R 412 611
Total tax paid (first plus second provisional tax payments) = R 379 811 (Use our handy income tax calculator to work out your tax obligation)
Calculation of penalty = R 412 611 - R 379 811 = R 32 800
Penalty amount = 20% of R 32 800 = R 6 560
It’s worth knowing that in either case, SARS can also lump on 10% interest on the underpaid tax amount, making the penalty even higher. In order to avoid these pointless under-estimation penalties, never simply guess a number for SARS! Try and estimate effectively and, if possible, use your previous year as a base point. SARS can ask you to justify your estimations, so it's a good idea to keep proper records of your calculations and input data.
SARS doesn't take late submissions of tax returns and/or payments lightly! Even one day late is considered late enough to make you pay a penalty. If you file your provisional tax return after the deadline, SARS considers you to have submitted a 'nil' return – or one where your estimate of taxable income is actually equal to zero.
Unless your actual taxable income is, in fact, zero, this will result in a 20% under-estimation penalty being imposed. This rule came about for tax years starting 1 March 2015.
What would happen if you'd been penalised for a late payment on one of your provisional tax payments, and then your annual assessment shows that you've under-estimated your taxable income too?
Fortunately, SARS won't demand the full amounts of both penalties, but you're still in for an extra charge. In this case, the under-estimation penalty will be reduced by the late payment penalty that has already been applied.
Let's look at Thabo again as an example.
We'll pretend his second provisional payment of R 12 000 was late by a few days. SARS applied the 10% late payment penalty, adding R 1 200 to Thabo's statement.
His end of year assessment shows he's under-estimated his taxable income and is liable for a penalty of R 1 274.80.
Considering the late penalty has already been applied though, SARS will deduct this amount from his under-estimation penalty, therefore (R 1 274.80 – R 1 200) = R 74.80 will be added to his penalties for the year.
These rules and penalties may seem harsh, but they exist to discourage taxpayers from deliberately underpaying their tax or postponing paying it.
However sometimes things do happen which are outside of your control. Maybe your bank experienced downtime on the 28th February and caused your payment to reach SARS late?!
If you have a valid and genuine reason for paying or submitting late, and you can provide evidence to back up your case to SARS, it's likely that they'll reverse your penalty – or at least part of it.
Our parting advice to avoid expensive penalties is to ensure that you're not leaving your tax returns – provisional or annual – until the last minute. Eliminate the need for guestimations by keeping a record of plausible projections of your annual income, and have reminders on your email or calendar about important tax dates.
How do I convert from a provisional taxpayer to a regular taxpayer? OR How do I de-register as a Provisional Taxpayer?
To de-register as a Provisional Taxpayer (this won’t affect your tax number), go on to eFiling and visit the Home Tab, then click Tax Types and de-register there. This will mean that you are only a "regular" (i.e. non-provisional) taxpayer now.
How do I register for provisional tax as a sole proprietor?
You can either apply as a provisional taxpayer when you first register for a tax number with SARS, or make the change on your SARS eFiling profile by going to the Home Tab and clicking Tax Types and registering there. Alternatively, you can visit your nearest SARS branch in person or call the call centre on 0800 00 7277 (0800 00 SARS).
Am I still a provisional taxpayer if I earn a salary as well as freelance income?
If you earn non-salary income, for example rental income from a property, interest income from investments or other income from a trade or small business you run, you may be a provisional taxpayer, even if you ALSO earn a salary.
Some exceptions and thresholds do apply though:
If you earn income from running your own business and your total taxable income is above the tax threshold (2023: under 65 years, R 91 250) then you will be a provisional taxpayer.
If you do not earn income from running your own business, but your total taxable income from interest, dividends and rental income is greater than R 30 000 per year, and your total taxable income is greater than the tax threshold (2023: under 65 years, R 91 250), then you will be a provisional taxpayer.
When do I need to submit provisional tax returns?
My business is running at a loss, do I need to submit a provisional tax return?
Yes you do, but you would submit a ‘nil return’ i.e. an estimated taxable income of zero which means you would pay no tax.
I missed the deadline, what now?
Late payments are subject to a penalty of 10% of the total tax amount payable, and will be levied for either, or both payment periods (August and February). Not only that, SARS will lump on interest at their prescribed rate, which is currently 10% per annum.
Where can I get the tax figures to insert in my IRP6?
The IRP6 will automatically calculate the tax you owe on your estimated taxable income. You can also use our employee's tax calculator to work out this amount.
I am a provisional taxpayer – how do I include my Retirement Annuity (RA) contributions in my provisional return?
When you enter your estimated taxable income on your IRP6, you can deduct the contributions you made to a RA for the year, which will reduce the tax paid in this period. If you are using our services we have a special question asking for this detail separately to calculate your taxable income.
If my employer is taking off PAYE each month, do I still pay that tax again?
When filing your IRP6, there is a spot for your Employees’ Tax and therefore you won’t have to pay this tax again.
Do I include ALL my income when completing my IRP6 Provisional Return?
Yes, you would include all income, including salary and employment income. You will not be taxed twice though, so don’t worry!