Are You Ready for the Next Provisional Tax Deadline?

“Death, taxes, and childbirth! There’s never any convenient time for any of them.” – Margaret Mitchell

Tax deadlines always seem to sneak up at the worst time, but proper planning can prevent a last-minute scramble. With the next provisional tax deadline fast approaching, now is the time to ensure you're fully prepared.

Understanding Provisional Tax

Provisional tax is a system that allows businesses and individuals classified as provisional taxpayers to pay their income tax in advance through two or three payments over the tax year. This approach helps to prevent large, unexpected tax liabilities when submitting annual income tax returns (ITR12 for individuals, ITR14 for companies) at the end of the tax year.

While this system offers the benefit of spreading out tax payments, it also brings added administrative responsibilities, including timely submission of provisional tax returns (IRP6). Failing to comply can lead to hefty penalties, especially for under-estimation.

Who Needs to Pay Provisional Tax?

• All companies are automatically provisional taxpayers.
• Individuals who earn income outside of a traditional salary (such as from a business, freelance work, investments, or rental properties) may also be liable.
• SARS places the responsibility on taxpayers to determine their provisional tax status, so it’s best to verify your obligations with a professional.

The Three Provisional Tax Payments

• First Payment: Due within the first six months of the tax year. If your 2025 tax year started on 1 March 2024, your first payment was due by 31 August 2024.
• Second Payment: Due by the last working day of the tax year (28 February 2025 for those on a March-February cycle). This payment has stricter regulations and penalties for under-estimation.
• Third (Optional) Payment: Can be made after the tax year ends but before SARS issues the final assessment. This is useful for reducing interest on any outstanding tax amounts.

Why the Second Payment Matters

The second provisional tax payment is critical because it is a final estimate of total taxable income for the full tax year. SARS imposes under-estimation penalties if your reported income is significantly lower than your actual taxable income.

• If taxable income is under R1 million, your estimate must be at least 90% of actual income or match the basic amount from the prior year to avoid penalties.
• If taxable income is over R1 million, your estimate must be at least 80% of actual income.

Failure to meet these thresholds results in a 20% penalty on the difference between the tax already paid and the revised tax calculation. SARS may also request documentation to justify your estimate and can increase your assessment at their discretion.

Avoid These Common Pitfalls

1. Failing to Submit a Nil Return: Even if you owe no tax, you must still file a nil return. Late or missing submissions attract administrative penalties.
2. Late Payments: Missing the deadline results in an immediate 10% late payment penalty, plus interest on the outstanding balance.
3. Incorrect Estimates: Under-estimating taxable income can lead to penalties and interest, making accurate record-keeping essential.

How We Can Help

Navigating provisional tax requirements can be complex, but you don’t have to do it alone. At Maverick Accountants, we ensure your tax estimates are accurate, compliant, and submitted on time. Our expertise can help you avoid penalties, reduce tax liability, and streamline the process so you can focus on what matters most - growing your business.

Don’t wait until the deadline is upon you. Get in touch with us today to make sure your provisional tax is handled correctly and stress-free!