Provisional tax in South Africa is a structured method designed to ensure that taxpayers who do not earn a regular salary still meet their tax obligations throughout the year. Instead of facing a large tax bill at the end of the financial year, provisional taxpayers are required to make advance payments based on estimated income. While the process helps manage cash flow and avoids surprises at year-end, it does require careful planning, timely submissions, and accurate estimations to avoid penalties.
Key Takeaways
- Provisional Tax Is a Prepayment System: It is not a separate tax, but a way for individuals—mainly those with non-salaried income—to pay income tax in advance to avoid large amounts owed at year-end.
- Multiple Submissions Required: Provisional taxpayers must file returns and make payments at least twice a year (August and February), with the option of a third top-up in September and a final annual return between July and January.
- Penalties Can Be Severe: Late submissions, underestimations, or missed payments can lead to automatic penalties of up to 20%, as well as interest charges, making accurate and timely filing essential.
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What Is Provisional Tax?
Provisional tax is not a distinct category of tax. Instead, it is a method that allows individuals to pay income tax in advance over the course of the tax year, rather than facing a large tax bill when submitting the final Income Tax Return (ITR12) to SARS at the end of the year.
It applies mainly to individuals who receive income outside of standard employment, such as earnings from freelancing, business profits, investments, or rental income. These individuals do not have tax automatically deducted through the Pay-As-You-Earn (PAYE) system, which is how most salaried workers meet their tax obligations.
Those who fall under the definition of a provisional taxpayer must complete and submit two Provisional Tax Returns (IRP6) during the tax year. They are also responsible for paying any tax due at those points. The first IRP6 return is due within the first six months of the tax year, and the second IRP6 return is due at the end of the same tax year. Taxpayers also have the option to make a third payment—a voluntary top-up—before submitting their final income tax return (ITR12), if they anticipate a shortfall.
Provisional Tax for Companies
Corporate Income Tax (CIT) applies to businesses that are either incorporated in South Africa or are effectively managed within the country, regardless of where their income originates. All businesses that are liable for taxation are obligated to register with SARS as taxpayers.
For any given assessment year, the obligation to file a return applies to companies or other juristic entities that meet any of the following conditions:
- Gross income exceeds R1 million
- Assets held exceed R1 million in value, or liabilities surpass R1 million at any time during the assessment year
- A capital gain or loss exceeding R1 million occurs from disposing of an asset covered under the Eighth Schedule of the Income Tax Act
- The company has any taxable income, taxable turnover, assessed loss, or assessed capital loss
If any of these apply, the company is required to submit an income tax return to SARS.
How Provisional Tax Gets Calculated
Provisional tax is based on a taxpayer’s estimated taxable income for the full financial year (March to February). This includes all income earned, minus exempt amounts and allowable deductions. Taxpayers must estimate their annual taxable income in August, divide it by two, and use this to calculate their first provisional payment.
A common question is how much of rental income is taxable. Expenses directly related to earning that income—such as maintenance or levies—can be deducted, reducing the taxable portion.
Taxable income includes both money received and amounts that have accrued, even if unpaid. For example, if a large payment is due in December, it must still be included in the August estimate. This can create cash flow pressure, especially for businesses and self-employed individuals.
When filing the second provisional return in February, most individuals will know their actual income and expenses up to January. They can then estimate February’s figures and calculate their total liability for the year. After subtracting the August payment, the balance must be paid to SARS.
While SARS offers a tax calculator, those with more complex finances should consider using a tax advisor. Underestimating income may result in penalties and interest, even if the shortfall is later paid.
Overlapping Tax Years
The process can cause some uncertainty, particularly for provisional taxpayers who are required to submit up to three or even four returns within a single year. These are typically spread out as follows:
- August: Submit the first provisional tax return for the current tax year, which begins in March.
- February: File the second provisional tax return, also for the current tax year, just before it closes at the end of the month.
- September: An optional third provisional return may be submitted. This return allows you to adjust or top up any shortfall in the tax paid for the year that ended in the previous February.
- July to January: During this period, you are required to file your annual income tax return for the prior tax year. For example, if you file in January, you are submitting a return for a year that ended almost 11 months ago, in the previous February.
Each submission plays a distinct role in ensuring that tax obligations are properly balanced and settled across overlapping tax periods.
How Provisional Tax Is Paid
The current steps to pay provisional tax are as follows:
Create an Account on SARS eFiling
To begin, you must register with SARS eFiling, which is the official online system used for submitting tax returns and making payments. This platform enables you to request the IRP6 return, submit it electronically, and complete your payment. Registration is done once and applies to all tax categories, using the client information system to link your details.
Add Provisional Tax If Already Registered
If you are already registered on eFiling, you do not need to repeat the full registration. Instead, you can add provisional tax to your profile, which will then allow you to submit and manage your IRP6 return directly through your account.
Who Is Exempt from Provisional Tax in South Africa?
There are specific criteria under which individuals and entities are not required to register or pay provisional tax. These exemptions aim to reduce the administrative burden for those with lower or simpler income streams.
Exemptions for Individuals
An individual is exempt from provisional tax if they do not earn income from a business and if their taxable income remains below the annual tax threshold. For the 2025 tax year, the threshold is R95,750 for those under the age of 65. For individuals aged between 65 and 74, the threshold increases to R148,217, and for those 75 years and older, it is R165,689.
Even if the income exceeds these amounts, individuals may still be exempt if the only income received—apart from standard remuneration—is from interest, foreign dividends, rental income from fixed property, or remuneration from an employer not registered for PAYE, and the total from these sources does not exceed R30,000 during the tax year. Interest income is also subject to exemption limits: up to R23,800 for individuals under 65, and up to R34,500 for those 65 and older. Income from tax-free savings accounts is not taken into account when determining provisional tax obligations.
Exemptions for Entities
Some entities are also exempt from provisional tax requirements. These include approved public benefit organisations (PBOs), recreational clubs with approved status, and certain bodies corporate and share block companies. In addition, small business funding entities and deceased estates do not fall under provisional tax obligations. The same applies to non-resident owners or charterers of ships or aircraft operating in South Africa and associations approved in terms of section 30B(2) of the Income Tax Act.
Companies and Mandatory Provisional Tax Status
Unlike individuals, companies are not typically exempt from provisional tax. All companies registered and operating in South Africa are automatically regarded as provisional taxpayers and are expected to submit IRP6 returns and make advance tax payments based on estimated income. This applies regardless of whether the company is trading actively or holds passive income only.
Provisional Tax Penalties
Provisional taxpayers—individuals who receive income beyond regular salaries or standard employment remuneration—are required to estimate their annual taxable income and submit provisional tax returns. This process is not a once-off activity; it must be done twice per year, typically in August and February.
Below are the most common penalties encountered by provisional taxpayers, along with practical guidance on how to avoid them.
| Penalty Type | Description | Key Details |
|---|---|---|
| Late Payment Penalty | A 10% penalty is charged on any late provisional tax payment. | – Applies to either or both payment periods: August and February. – 10% annual interest is charged on overdue amounts at SARS’s prescribed rate. – SARS is strict—penalties may apply even for minor delays. – If the due date falls on a weekend or public holiday, payment must be made on the preceding business day. |
| Under-Estimation Penalty | Imposed when your final taxable income exceeds the estimated income submitted on your second IRP6. | – SARS expects accurate estimates. – Penalties vary by income: – Above R1 million: stricter calculation. – Below R1 million: different penalty structure. |
| Late Submission Penalty | Filing your provisional tax return after the deadline triggers serious consequences. | – Even being one day late is treated as a ‘nil’ return (estimated income = R0). – If actual income is not zero, a 20% underestimation penalty applies. – In effect since 1 March 2015. |
| Combined Penalty: Late Payment & Under-Estimation | When both late payment and under-estimation occur, SARS adjusts the penalties. | – SARS does not add both penalties together. – The underestimation penalty is reduced by the amount already charged for late payment. – Partial relief, but you still face financial consequences. – Avoid both by submitting accurate estimates and paying on time. |
Conclusion
Provisional tax in South Africa is designed to help individuals and businesses that do not receive regular PAYE deductions manage their income tax liabilities throughout the year. By requiring two or more advance payments based on estimated income, it reduces the risk of owing a large amount at year-end. However, it also demands careful planning, accurate income forecasts, and strict adherence to SARS deadlines. Failing to comply can result in significant penalties, so staying organised and, where necessary, seeking professional advice is advisable for anyone registered as a provisional taxpayer.
Frequently Asked Questions
Who needs to pay provisional tax in South Africa?
Provisional tax applies to individuals and entities earning income that is not automatically taxed through the PAYE system. This includes people who are self-employed, freelancers, property landlords, or those receiving significant investment income.
When are the provisional tax return deadlines?
The first provisional tax return (IRP6) must be submitted by the end of August, the second by the end of February, and a third optional top-up return may be submitted in September. The annual income tax return for the previous year is due between July and January.
What happens if I miss a provisional tax payment?
If a payment is missed, SARS will impose a 10% penalty on the outstanding amount. In addition, interest is charged on overdue payments, with no grace period even for minor delays.
How do I estimate my taxable income for provisional tax?
To estimate taxable income, calculate all income expected for the year, deduct allowable expenses and exemptions, and divide the figure by two for the first IRP6. For the second return, use actual income and expenses to adjust the estimate accordingly.
Can I file my provisional tax return online?
Yes. The SARS eFiling platform allows you to manage your provisional tax obligations, including completing IRP6 returns and making payments. Once registered, you can add provisional tax to your profile and submit everything electronically.
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