Provisional tax is one of the most misunderstood obligations for South African business owners. If you earn income that isn't subject to employees' tax (PAYE), or you earn more than R30,000 per year from sources other than your main salary, you're likely a provisional taxpayer.
Who Must Register for Provisional Tax?
You must register for provisional tax if you: (1) are a company or close corporation, (2) earn income from a business or profession, (3) receive rental income, investment income, or income from a trust, or (4) earn non-employment income exceeding R30,000 per year.
Employed individuals who only earn a salary don't need to register — their employer deducts PAYE. But if you have a side business, rental property, or freelance income, provisional tax likely applies to you.
The Two Submission Deadlines
First period (August): You must submit an IRP6 return and pay provisional tax by 31 August each year. This is based on your estimate of taxable income for the current year, with a minimum based on the prior year's assessment.
Second period (February): Your second IRP6 is due by 28 February. By this point, you have more information about your actual year's income, so your estimate should be more accurate.
There's also an optional third period (September) that allows you to top up if you've underpaid — this can help avoid interest charges.
How to Calculate Your Provisional Tax Estimate
Your estimate must be at least as high as your basic amount (the taxable income from your last assessment). If your estimate is less than 90% of your actual taxable income, SARS will charge a penalty of 20% on the underpayment.
To avoid penalties: always estimate at least equal to your basic amount, and update your estimate in February once you have a clearer picture of the year's income.
Penalties for Late or Underpayment
Late submission carries a flat penalty of 10% of the tax liability, plus interest at the prescribed rate. Underestimation by more than 10% of actual taxable income triggers an additional 20% penalty on the shortfall.
The best defence is accurate record-keeping throughout the year — which is where cloud accounting pays dividends.
Working with a Tax Practitioner
As a SARS-registered Tax Practitioner, Sikatrix Business Accountants manages provisional tax submissions for all our business clients. We calculate your estimates accurately, submit on time, and advise on any top-up required before the September window closes.
If you're not sure whether you're correctly registered for provisional tax, or you've missed a submission, contact us for a free consultation.