In South Africa anyone who earns income other than, or in addition to, a salary, wage or allowance is considered a provisional taxpayer.

Provisional tax is not a separate tax. Employers deduct Pay As You Earn (PAYE) tax on income earned from their employees each payroll run, and this is paid over to the South African Revenue Service (SARS) monthly. In order to collect tax on people’s income other than their wage/salary during the tax year, provisional taxpayers are obliged to report on additional income, or anticipated additional income, and pay tax on this during the tax year. SARS states that this is to ensure that these taxpayers are not faced with large amounts of tax owing at the end of the tax year.

Is there additional income which is exempt from this rule?

Within limits, interest earnings are not included in the definition of additional income which would require paying provisional tax. If one is under 65 years of age, and earns less than R23 800 interest in a year, or if one is over 65 years and earns less than R34 500, then this is not necessary. This also applies to people with tax free savings accounts.

Any interest earnings over these amounts, or any other income earned (e.g. rental income, dividends) require that provisional tax is paid.

How often and how much?

Provisional taxpayers have to submit returns twice during the tax year, and may add a voluntary 3rd payment:



* a “top-up” payment, to cover any shortfall in tax paid over for the previous tax year.

How are these amounts paid?

This is most easily accomplished through the SARS eFiling platform, and then adding Provisional Tax to your profile, through an IRP6 return. 

SARS has issued an excellent step-by-step guide on how to eFile a Provisional Tax Return (see references below). An additional benefit to being an eFiler is that one has longer to submit tax returns than those who submit manually. 

Other interesting facts

Companies are provisional taxpayers too! They automatically fall into the Provisional Taxpayer category, as do people who work for organisations which are not registered for employees tax (e.g. embassies). 

Excluded from being Provisional Taxpayers are approved public benefits organisations such as clubs, if approved as such by the Commissioner, body corporates and non-residents, deceased estates and small business funding entities. 

Additionally, if you are running a business, and do not earn more than the tax threshold, you are not a provisional taxpayer. For the 2020 tax year (i.e. for the March 2019 to end February 2020), this means earning less than R79 000 if you are less than 65 years of age, R122 300 in the year for people between the ages of 65 and 75, and R136 750 if you are over 75 years of age.

It should be noted that SARS may request justification of an estimate of tax payable which has been submitted. This will be done in writing, and SARS may increase the estimate to what they believe is due.

Links, References and Notes

Accsys provides people management solutions i.e. Payroll, Human Resources (HR), Time and Attendance as well as Access Control/Visitor Management.

The company develops, implements, trains and services our solutions. We provide readers, turnstiles, booms and CCTV.

We run both on premise and in the cloud, as well as mobile options for ESS. Recruitment, online education and Business Process Outsourcing (BPO) are part of our offering, too.

www.accsys.co.za

References:

https://www.gov.za/services/tax-company-income-tax/register-provisional-tax-payer

https://www.sars.gov.za/TaxTypes/PT/Pages/default.aspx

https://www.sars.gov.za/AllDocs/OpsDocs/Guides/IT-PT-AE-01-G02%20-%20How%20to%20eFile%20your%20Provisional%20Tax%20Return%20-%20External%20Guide.pdf