If, as an individual, you need to make two (or maybe three) tax payments a year, the reason could be that you are registered as a provisional taxpayer.
Provisional tax is similar to employees tax (PAYE) in that it is not an additional tax but rather, it is a method of paying normal tax on your taxable income in advance. The payment of provisional tax means that your tax is paid closer to when the income is earned and helps to prevent the possibility of a delayed tax bill which you may not be able to pay. These advance payments are credited against the tax due once assessed on submission of your Income Tax return.
The Tax Administration Act defines who is considered a provisional taxpayer and this includes individuals who earn income from a source not registered as an employer for PAYE purposes, for example rental or investment income.
It is important to note that there is no registration or deregistration process for provisional tax, it is the responsibility of the taxpayer to determine if they are liable for provisional tax and to request to submit the necessary return.
As individuals, you will need to file two provision tax returns a year. The first must be submitted and paid before the last working day of August, and the second before the last working day of February, the end of the tax year. When submitting your provision tax returns you will need to estimate (with a fair degree of accuracy) your taxable income for the year and then calculate your projected tax liability. Depending on your level of income SARS allows either a 10% or 20% variance and any variances larger than this could result in penalties and interest. In the event that you have underpaid your provisional tax, you are allowed to make a third “top-up” payment before the end of September (seven months after the end of the tax year).
As you can see, the rules around Provisional Tax are complex and this article is for information purposes only and is not to be construed as tax advice, nor does it take into account your specific financial circumstances. We encourage you to speak to a tax specialist from Chartered Tax or your RetiremeantTM Specialist. Tax legislation changes regularly, and we believe professional specialists can add great value in helping you to keep your affairs up to date and in order.
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(FSP no. 13909)