Taxpayers are basically individuals or companies who earn business income. They do not pay tax on it until the end of the year. This is done because there is no way for them to know how much they earned during the year. It is hard to calculate the tax payable on it. Therefore, they pay a portion of that year’s tax in advance throughout the year with each payment being called “provisional income”.
How to Pay Tax in South Africa
Provisional taxpayers can do it themselves. They can even outsource this job to a registered tax practitioner or a company. If you choose to pay it yourself, the first step is to figure out how much of your provisional tax for this year was already paid last year. If you did not pay any tax last year, then that amount is zero. This method will only work if you were a provisional taxpayer throughout that time or you did not complete your annual tax return. If you were not a provisional taxpayer throughout that time, then you will have to do all of this year’s calculations yourself.
If you choose to outsource your provisional tax for this year, the company will charge some fees. You can contact these tax professionals directly. Any reputable tax pro should have a website you can visit for more information.
Calculating Tax
Provisional taxpayers calculate their provisional tax. They calculate it by taking their total taxable income for the year and dividing it by four. This is equal to your provisional tax liability. You then add this up with last year’s provisional tax liability. Conversely, you add your total provisional tax liability from when you completed your return, whichever amount is higher.
You will need to prove how much tax you paid last year by submitting a copy of your P3 or form IRP5. If you did not complete your previous year’s tax return, then add up the provisional tax that you paid in each quarter for this year. Then submit that with your annual return.
Provisional Tax Deadline
Provisional tax is mandatory in South Africa. It is due by March 31st each year. Whether you calculate this yourself or outsource the work, be sure to complete these tasks by the due date. In other cases, you will face penalties for a late submission.
Who Qualifies As A Provisional Taxpayer?
Provisional taxpayers include:
- Individuals who receive taxable non-employment income (i.e. self-employed).
- Individuals who receive taxable non-employment income (i.e. not working but receiving rental income).
- Individuals or companies that do not complete their annual tax returns.
- Individuals or companies that receive taxable employment income (but are not PAYE taxpayers).
Who is Exempt from Tax?
Individuals who receive taxable employment income are automatically PAYE taxpayers. This means that they do not have to pay provisional tax on their non-employment income. This is because PAYE already operates for this.
Provisional Tax VS PAYE
Provisional tax is an income-based calculation of the estimated tax payable on non-employment income. It is mandatory, while PAYE is not mandatory if you receive taxable employment income.
