We are right at the edge of the end of August which means that the deadline for the 1st Provisional Tax returns for the Tax Year ending 28 February 2019 is upon us.
For those of you who might be new Provisional Taxpayers or might need reminding of what it entails, herewith then a short summary of what it is all about.
A provisional taxpayer is any person who earns income other than remuneration or an allowance or advance payable by the person’s principal. An individual is exempt from the payment of provisional tax if the individual does not carry on any business and the individual’s taxable income.
• will not exceed the tax threshold for the tax year; or
• from interest, foreign dividends and rental will be R30 000 or less for the tax year.
All companies are provisional taxpayers and need to submit provisional tax returns by 31 August.
Provisional tax returns showing an estimation of total taxable income for the year of assessment are required from provisional taxpayers.
Provisional tax is not a separate type of tax but pre-payments on income tax for a specific tax year. The aim of provisional tax payments is to help taxpayers to fulfill their tax responsibilities by spreading tax payments over a tax year. After SARS has assessed a taxpayer for income tax, the provisional tax payments will be set off against the final liability for income tax for a specific tax year.
Underpayment of provisional tax
If a taxpayer did not pay enough provisional tax during the tax year and there is a liability after offsetting provisional tax against income tax due on assessment, the taxpayer will be liable for penalties and interest on underpayment of provisional tax.
Overpayment of provisional tax
If the provisional tax was overpaid, i.e. provisional tax payments were more than the assessed income tax liability for a tax year, the excess amount will be refunded to the taxpayer with interest.
Three provisional tax returns per tax year
The provisional tax return/IRP6 must be submitted two or three times per year, depending on the circumstances of the taxpayer.
1. 1st IRP6 (compulsory):
– This return covers the half of total tax on estimated taxable income for the tax year less PAYE for the first 6 months of the tax year
– Deadline for submission and payment (if applicable) is 31 August 2018.
2. 2nd IRP6 (compulsory):
– This return covers the total tax on estimated taxable income for the tax year less PAYE for the full tax year (12 months) and the first provisional tax payment
– Deadline for submission and payment (if applicable) is 28 February 2019
3. Third provisional tax return – top-up payment – IRP6(3) (optional).
– For this return, we calculate the total tax on estimated taxable income for the tax year less PAYE for the full tax year (12 months) and the 1st and 2nd provisional tax payments.
– If there is any shortfall due to SARS it can be declared on this return and it is then due and payable by no later than 28 September 2019.
Please contact us for assistance