2nd Provisional Tax Payment Due February
/As we approach February 2025 it's time to remind you about the upcoming deadline for the 2nd provisional tax payment. This applies to companies with a financial year ending in February, as well as all provisional taxpayers in South Africa.
Ensuring that your provisional tax is submitted on time is crucial to avoid penalties and interest imposed by the South African Revenue Service (SARS).
Understanding Provisional Tax in South Africa
Provisional tax is not a separate tax from income tax; rather, it is a method of paying your income tax liability in advance. This system helps spread the tax liability over the year, preventing a large tax debt at the end of the assessment period.
Provisional taxpayers are required to make at least two payments during the year based on their estimated taxable income. A third payment is optional and can be made after the end of the tax year but before the assessment is issued by SARS.
If you decide to make a third payment and the tax paid does not cover at least 80% of the tax liability due, SARS will automatically add penalties, and you will need to appeal this and provide a valid reason for not submitting and paying enough provisional tax in payments 1 and 2. So, we don’t recommend this method 😊
Who Needs to Pay Provisional Tax?
Provisional taxpayers include any person who receives income other than remuneration, such as consulting fees, rental income, or investment income. Companies automatically fall into the provisional tax system, and there is no need for separate registration.
For individuals wondering if they should submit a provisional tax return, please ask us, or if you look on your last assessment, there should be a ‘Y’ next to registered for provisional tax.
If this is the first year you need to be registered for provisional tax, then you need to request the tax profile and ensure you submit a provisional tax return. SARS does not accept excuses like ‘I did not know I had to be registered’ unfortunately.
Calculating Provisional Tax
For the 2nd provisional tax payment, which is due by the end of February 2025, the amount should be at least 80% of the total tax due for the year.
If you don’t meet this requirement, it may result in penalties and interest from SARS. Here’s a simplified example of how to calculate your provisional tax:
Estimate your taxable income for the year. You can either use actuals for 10/11 months or estimates from budgets.
Calculate the normal tax on this estimated income.
Subtract any applicable rebates and credits or tax already paid in the 1st provisional tax submission.
Ensure that the provisional tax paid is at least 80% of the total tax due.
If the tax already paid does not cover the tax liability or at least 80%, make the payment before the end of February 2025.
We Are Here to Help
We understand that tax calculations can be complex and time-consuming. Our team is here to assist you with your 2nd provisional tax submission. If we haven't been in touch yet or if you haven't sent us your information, please do so as soon as possible. This will allow us to ensure your submission is accurate and timely.
Feel free to reach out to us if you have any questions or need further assistance. We are committed to helping you navigate the provisional tax process smoothly.
