Provisional taxpayers who have not yet submitted their first tax return for the current tax year are advised to do so as quickly as possible.
Payment is due at the end of August and a 10% penalty on the amount due and interest will be charged on late payments. However, it seems the technical glitches experienced at the start of the 2019 filing season are still around.
The South African Revenue Service (Sars) has acknowledged the “dissatisfaction” taxpayers have expressed over the glitches encountered while trying to submit their tax returns.
It appears that problems around logging in, not receiving one-time pins, the inability to upload supporting documents, and data issues impacting filing, including assessments and tax calculator results, have persisted.
“Sars takes these issues very seriously, and all efforts have been made to resolve them expeditiously and minimise the impact on compliant taxpayers who want to fulfil their filing obligations,” the tax agency said in a statement released on July 30.
‘Provisional tax’ is not a type of tax
Marc Sevitz, co-founder and director of TaxTim, says provisional tax is not a type of tax. It is rather a payment mechanism that is intended to assist businesses and individuals to meet their normal tax liabilities. Provisional tax payments are based on the estimated taxable income for the year.
In practice, salaried employees have their pay-as-you-earn (PAYE) tax deducted on a monthly basis and paid over to Sars by their employer.
Taxpayers who earn other income (such as interest on investments or rental income) do not pay the tax on that income on a monthly basis; instead, Sars requires – or allows – them to make payments twice a year, in August and then again in February.
“Taxpayers who are freelancers, or operate as sole proprietors, would also be considered provisional taxpayers,” says Sevitz.
This system is intended to spread out the tax liability over the year and therefore avoid a single substantial tax payment after the tax year-end, he adds.
Earnings from abroad automatically in the provisional category
Hugo van Zyl, vice-chair of the South African Institute of Tax Professionals’ personal tax committee, says most South African taxpayers working and living abroad fail to understand that they are provisional taxpayers by default.
“They feel shielded by the fact that they are subject to some payroll taxes, yet they forget that the employer is not a Sars-registered employer.”
Van Zyl says that because the employer is tax non-resident it triggers a provisional tax filing obligation in SA.
“Failing to file the provisional tax returns allows Sars to raise penalties for the underestimation of provisional tax as the returns not filed are assumed to have been nil returns.”
Sevitz explains that if the income is declared on the final tax return (ITR12) then Sars will consider this difference to be an understatement of income, and the taxpayer will be penalised heavily.
The importance of an accurate estimate of income
The provisional return form is called an IRP6 and needs to be completed by the end of August and again at the end of February each year, with a possible top-up return and payment in September.
The return that is submitted in August is forward-looking. “That is to say an estimate of the full 12 months’ income and deductions is performed and then the tax is worked out on the taxable income. This is then halved and the taxpayer pays the amount owing.”
Taxpayers should be very careful to ensure that they estimate the correct income on their returns for both August and the final one in February. The February return will represent the full 12 months of the tax year, less the amount already paid in August when the first IRP6 was submitted.
Sait says provisional tax remains a tricky affair. “Dates can easily be overlooked and care is required with calculations. Sloppiness – no matter how innocent – can be costly [in the form of penalties and interest on the penalties].”
The annual tax season kicked off on July 1 and has different submission deadlines for taxpayers. Non-provisional taxpayers who are filing through Sars’s online platform such as eFiling and the MobiApp have until December 4 to do so. Those who prefer to submit their returns at a Sars branch office will be able to visit a branch between August 1 and October 31.
Provisional taxpayers have until the end of January 2021 to file their final return.
|Provisional taxpayer deadlines for the year ending Feb 2020|
|1st payment (tax on estimated income, Mar to Aug 2019)||End Aug 2019|
|2nd payment (tax on estimated income, Sep 2019 to Feb 2020)||End Feb 2020|
|3rd or ‘top-up’ payment (if you underestimated the above)||End Sep 2020|
|Submission of final tax return||End Jan 2021|