Top Tips for the Proverbial Provisional Taxpayer

For those assiduous taxpayers who receive an income other than a salary or remuneration, on which no income tax has been deducted, the Receiver of Revenue will consider them as provisional taxpayers.  Law requires them to affirm their estimated income and pay the applicable tax thereon timeously.   However, to assist provisional taxpayers to have a flush cash flow throughout the year and avoid one large, possibly crippling payment, these taxpayers are required to make two (optional three) payments during that assessed year.  The payment deadlines are the end of August and the end of February.  Once that tax year ends, SARS will make a final assessment and any overpayment will be refunded.

Although submitting at least these two tax returns in a year can be deemed as laborious, it is imperative that this is done to avoid being lumbered with penalties from the Receiver.  Below are four prompts to remember to avoid any such consequences.

  1. Making of Late Payments

There is a 10% penalty applied against the total tax payable amount for late payment.  There could also be an extra add-on charge for interest incurred, which is currently 10% per annum.  The Receiver will not hesitate to implement these penalties swiftly and speedily, so sticking strictly to the deadline at the end of August and the end of February is imperative.

  1. Under-Estimating the Taxable Income

Guesstimating your annual taxable income as vigilantly as possible is formidably the most important challenge for a provisional taxpayer.   You could face extremely hefty fines if you underestimate these values.  Although the penalty differs for an income of more than R1 million compared to those less than R1 million, the punitive charges are still very harsh.

  1. Late Submission of Returns

Don’t test the deadlines set by the Receiver.  Their response will be quick and shrewd.  Even just one day overdue could result in a 20% under-estimation penalty being imposed on you.

  1. Third ‘top-up’ Payment

If you realise that you may have underpaid your tax for the preceding year, it will be wise to make a voluntary payment by the end of September.  Doing this could save you being charged interest on the underpaid tax assessment.

Our parting advice on this issue is to always keep on top of your finances and don’t leave things to the last minute.  Keep sound records of the actual and plausible projections of your annual income and don’t forget to etch in calendar deadline reminders of due dates.