IS PROVISIONAL TAX THE SAME AS INCOME TAX?
A “provisional tax” is a type of payment that allows taxpayers to avoid owing a large amount of tax on an assessment. It is typically made in advance and can be spread over a certain year’s worth of income. Taxpayers are required to make at least two payments in advance during the assessment year.
Although a third payment is not mandatory after the end of a tax year, it can be made before the South African Revenue Service (SARS) issues an assessment. On assessment, these payments will be adjusted against the normal tax liability for the year.
WHO IS THE PROVISIONAL TAXPAYER?
Individuals who receive income that is not related to their remuneration are called “provisional taxpayers.” This means that most salary earners are not qualified to be availing of tax relief.
- If you receive interest of less than R23 800, if you are under 65; or
- If you receive interest of less than R34 500 if you are 65 and older or;
- You receive an exempt amount from a tax-free savings account.
Specified as a “provisional taxpayer” in the Income Tax Act’s fourth schedule is a person who made an advance payment before the end of the tax year.
- In addition to being a natural person, who derives income from other sources, such as an allowance or an advance, a person also becomes a “provisional taxpayer” if the income derived from an employer is not registered with the authorities for the purposes of employees’ tax.
- Company, or person who is told by the Commissioner that he or she is a provisional taxpayer.
The term “provisional taxpayer” is defined in the fourth schedule of the Income Tax Act of 1962.
In terms of section 8(1) of the Income Tax Act, a natural person can be considered a “provisional taxpayer” if he or she derives income from an organization that is not registered as an employer for the purposes of employees’ tax.
At TandA we Calculate & Submit Income Tax| Provisional Tax Returns for Small Companies.