A 360 on Provisional Tax

What is Provisional Tax?

The first thing to know and understand is that Provisional tax is not a different/separate taxation form, from income tax.  It is simply one of the methods of paying your income tax. 

What is the purpose of Provisional Tax?

This form of paying tax allows you to pay income tax during the tax year in which your income is generated.  It’s an advance payment of your income tax liability.

And why would you want to do that?

To ensure that you don’t have a large amount of tax debt on assessment.  Provisional tax allows your tax liability to be spread over a set tax season.

Who needs to pay Provisional Tax?

Not everyone can be considered a Provisional Taxpayer.  Only persons who generate their income from a source other than remuneration (also known as a salary), is considered a provisional taxpayer.  Most salary earners are not-provisional taxpayers, seeing as they have no other income sources besides their salary.

When is Provisional Tax due?

The tax year starts on 1 March each year and the first provisional payment is due by 31 August of that year.  You have to submit your tax return from 1 July to 31 until January.

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Provisional Tax vs PAYE?

PAYE is the method of collecting your income tax based on your employment earnings.  PAYE is deducted from your salary monthly and will be visible on your monthly payslip.

Therefore, the main difference between PAYE and provisional tax lies in the method of payment.  PAYE is a monthly deduction from your salary and provisional tax is an advance payment.

Each method requires its own tax return form – PAYE requires an IRP5 form for returns and a Provisional Taxpayer requires an IRP6 form for returns.

Are Provisional Tax Returns filed at the same time as PAYE?

Yes, once a year all tax returns are submitted to SARS.  The only difference will be in the type of form used to submit your return.

And that’s your complete 360 on Provisional Tax! It’s always important to stay on top of your tax affairs and to know when payments are due, returns should be submitted and whether or not certain important tax dates are applicable to you in order to avoid any trouble from the taxman.  Your best and safest bet regarding your tax affairs will always be to hire a great accountant to assist you with your affairs, but if push comes to shove, be sure that you are always well-informed!