Avoid Interest and Penalties! Submit your Provisional Tax Return by 28 February 2018!
29 Jan 2018
A provisional taxpayer must, during every period submit an estimate of the total taxable income which will be derived in that year of assessment. Provisional tax payments must be made by natural persons on or before 28 February and 31 August each year. The South African Revenue Service ("SARS") also allows for a third "voluntary top up" or "additional" provisional payment, which must be paid on or before 28 September.
In the event that the taxpayer also receives income in the form of a salary, the PAYE deducted during the year of assessment will be taken into account when calculating the estimated amount.
Provisional taxpayers are also entitled to a foreign tax credit in respect of foreign taxes paid on income from a non-South African source.
It is important for taxpayers to ensure that they meet the abovementioned payment deadlines to avoid unnecessary tax liabilities in the form of interest and penalties. In this regard, we highlight below the consequences of the late or underpayment of provisional tax.
Late payment of provisional tax
- interest at the prescribed rate on late payment;
- a penalty of 10% will be levied on any late payment in respect of the first
- and second periods; and/or
- SARS will consider the estimate income to be nil if four months has lapsed since the due date of the second provisional tax payment.
Underpayment of provisional tax
- A penalty up to a maximum of 20% of the underpayment may be levied by SARS;
- If the taxable income is more than R1 million, a penalty will be levied if the second period estimate is less than 80% of the actual taxable income;
- If the actual taxable income is equal or less than R1 million a penalty will be levied if the second period estimate is below the basic amount and not within 90% of the actual taxable income for the year.
Capital gains during the year
There is also a duty on a provisional taxpayer to include in its estimated taxable income capital gains that arose or will arise during the year of assessment.
The due date for the second provisional tax payment, being 28 February 2018 is around the corner. All provisional taxpayers are urged to submit their tax returns correctly and on time. Should you need assistance with submitting your provisional tax returns, please feel free to contact our offices.
Please do not hesitate to contact your PKF office directly should you need any further advice or information.