2023 2nd Provisional Tax Return – due 28 February 2023

Provisional Tax

Provisional taxpayers are required to make two compulsory tax payments during the year of assessment (for example – 1 March 2022 to 28 February 2023). The first is payable within the first six months of the tax year. The second is payable by no later than the tax year end.

The following provisional payments are required for taxpayers with a 28 February 2023 year end:

• 2023 first provisional – due 31 August 2022
• 2023 second provisional – due 28 February 2023

Provisional tax payments are based on the taxpayer’s estimated taxable income and are advance payments in respect of Income Tax payable for the year.

Who is a Provisional Taxpayer?

Any person who receives income (or to whom income accrues) other than remuneration, is a provisional taxpayer.  Most salary earners are therefore not-provisional taxpayers if they have no other sources of income.

It is important to note that receiving exempt income, as follows, does not make you a provisional taxpayer:

• If you receive interest of less than R23 800 if you are under 65; or
• If you receive interest of less than R34 500 if you are 65 and older or;
• You receive an exempt amount from a tax-free savings account.

A provisional taxpayer is defined in paragraph 1 of the Fourth Schedule of the Income Tax Act, No.58 of 1962, as any:

• natural person who derives income, other than remuneration or an allowance or advance as mentioned in section 8(1) or who derives remuneration from an employer who is not registered for employees’ tax (for example, an embassy is not obligated to register as an employer for employees’ tax purposes)
• company; or
• person who is told by the Commissioner that he or she is a provisional taxpayer.

Excluded from being a provisional taxpayer as defined are any:

• approved public benefit organisations or recreational clubs that have been approved by the Commissioner in terms of s30 or s30A;
• body corporates, share block companies or certain associations of persons that are exempt from tax;
• non-resident owner or charterer of ships or aircraft;
• natural person who does not earn any income from carrying on any business – provided that person’s taxable income will not be more than the tax threshold (for the 2023 tax year: for taxpayers below the age of 65 –
  R91 250; age 65 to below 75 – R141 250 and age 75 and over – R157 900); or the taxable income of that person (earned from interest, foreign dividends, rental from letting of fixed property and remuneration from unregistered employer) will not be more than R30 000;
• a small business funding entity;
• a deceased estate.
• any association that has been approved by the Commissioner under section 30B(2)

Estimated Taxable Income

When preparing your Provisional Tax return, there are two methods which can be used to estimate your taxable income for the year:

1. SARS Basic amount

This is an estimate of your taxable income for the year provided by SARS. It is calculated using the taxable income amount from your latest assessed Income Tax return. Should SARS deem it necessary, they may increase this amount.

2. Calculation

Using the information available to you, you can compile an estimate of your taxable income for the year. Assumptions and/or estimations for incomes or deductions are allowed so long as they are justifiable.

Please note: Although a taxpayer is allowed to use the SARS Basic amount when completing their Provisional Tax return, SARS may request a calculated estimate from the taxpayer. Should SARS decide that the calculated estimate is more appropriate, they may insist that your Provisional Tax payment be based on your estimate instead.

Penalty for Underestimation of Provisional Tax

When the Income Tax return has been assessed by SARS for a given tax year, SARS will assess whether a fair estimate of the taxable income was submitted in the taxpayer’s 2^nd Provisional Tax return.

If an underestimation was made, the penalty charged by SARS is determined as follows:

• Taxpayers with an actual taxable income for the tax year of up to R1 million
• Taxpayers with an actual taxable income for the tax year of more than R1 million

Taxable income up to R1 million

Where the taxpayer’s actual taxable income is R1 million or less, the sum of the 1^st and 2^nd Provisional Tax payments (Amount A) made must be equal to or greater than the Income Tax payable on the smaller of the following amounts (Amount B):

• The SARS Basic amount (after personal rebates and medical credits); or
• 90% of the actual taxable income for the tax year (after personal rebates and medical credits)

If Amount A is not equal to or greater than Amount B, a 20% penalty is levied on the shortfall.

Taxable income over R1 million

Where the taxpayer’s actual taxable income for the tax year exceeds R1 million, the sum of the 1^st and 2^nd Provisional Tax payments (Amount A) made must be equal to or greater than the Income Tax payable on 80% of the actual taxable income for that tax year (Amount B).

If Amount A is not equal to or greater than Amount B, a 20% penalty is levied on the shortfall.

Please note: SARS can waive this 20% additional tax penalty in whole or in part if satisfied that both of the following apply:

• The taxable income for the provisional tax return was seriously calculated with due regard to the factors having an effect on it; and
• The estimated taxable income was not deliberately or negligently understated.

SARS’s discretion in this regard is subject to objection and appeal.

Payment of Provisional Taxes

Payment via EFT

Please ensure that payments are made to SARS no later than 28 February 2023. Should payments to SARS be late, SARS will levy a 10% penalty on the amount as well as interest (currently 10.5% p.a.).

Payment via e-filing

Should you require us to make a payment via SARS e-Filing on your behalf, please ensure that the appropriate payment instructions are communicated to us in writing no later than 21 February 2023.