By Nannette Botha
Cash flow considerations with provisional tax can be a headache.
Provisional tax does seem like an administrative hurdle from SARS, but with some planning, it can be used as a tool that allows both tax planning and cash flow planning.
Important dates to consider for individuals and entities with February year ends:
| Return / Payment | Tax year | Due date |
| Second provisional tax return |
2025 |
28 February 2025 |
| First provisional tax return |
2026 |
29 August 2025 |
| Third provisional tax payment |
2025 |
30 September 2025 |
| Annual income tax return – non provisional individual |
2025 |
July to October 2025 |
| Annual income tax return – provisional individual |
2025 |
July 2025 to January 2026 |
While a salaried taxpayer has monthly tax deductions to SARS from their income, this is not possible (or not sufficient) for provisional taxpayers who typically do not earn a monthly income or earn income that is not subject to pay as you earn (PAYE) deductions. Rather than paying the entire tax obligation when the income tax assessment is submitted, the provisional tax regime requires two (or three) payments to ensure timely payment of income tax.
Provisional tax includes two estimates of the amount of tax that will be payable with respect to a year of assessment:
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after six months, when half of the estimate for the next tax year is payable,
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AND
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at the end of the year when the calculation is revised, and the rest of the estimated tax is payable.
Prior income tax returns are an important factor to consider for what SARS considers the “basic amount”; if less than a million rand of taxable income is estimated, the basic amount can be used for the estimate. SARS provides this basic amount, which is based on historic taxable income, excluding capital gains. If more than R1 million of taxable income is expected, the basic amount is not at play, and a calculation must be made to determine the expected income for the tax year.
For both of the provisional tax payments, a tax return (IRP6) must be completed and submitted, after which payment is due. If any circumstances arise or change after the second submission and payment was made, there is an opportunity to make a third payment, in order to avoid additional interest. This is done 6 months after the financial year end (or the end of September for individual provisional taxpayers).
Unfortunately, failure to do so will result in penalties and interest – either for late submission, late payment or if an under-estimate of income was submitted for provisional tax compared to the final income tax submission.
Some good news is that provisional tax is not an additional, isolated tax stream. It does take into account the amounts already paid through PAYE, and it is also taken into account when total tax payable is calculated.
Please do not hesitate to contact our knowledgeable team for assistance.
www.auroprofessional.com
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