Provisional Tax in South Africa: Who Must Pay, Deadlines, and How to Calculate

What Is Provisional Tax in South Africa?

Provisional tax is a method of paying income tax in advance, in instalments during the tax year, rather than as a single lump sum at the end of the year. It is not a separate tax ΓÇö it is simply a way of spreading your income tax liability across the year to prevent a large payment at assessment time.

For business owners, freelancers, and individuals earning income beyond a salary in East London and across South Africa, understanding provisional tax obligations is essential to avoid penalties from SARS.

Who Is a Provisional Taxpayer?

According to SARS, a provisional taxpayer is:

• Any person (other than a company) who earns income that is not remuneration, or who earns remuneration from an employer not registered for employees’ tax (PAYE)
• Any company registered in South Africa
• Any person notified by the SARS Commissioner that they are a provisional taxpayer

In practical terms, you are likely a provisional taxpayer if you:

• Own a business (sole proprietor, partnership, or company)
• Earn rental income from property
• Earn freelance or contract income
• Earn investment income (interest, dividends) above the exemption thresholds
• Earn income from more than one employer where one does not deduct PAYE

Who Is Exempt from Provisional Tax?

You are not a provisional taxpayer if:

• You earn only remuneration from a single employer who deducts PAYE
• You are a natural person and your taxable income (excluding remuneration) does not exceed R30,000 for the tax year
• You are a natural person and your total taxable income does not exceed the tax threshold (R95,750 for persons under 65 for the 2025/2026 tax year)

Provisional Tax Payment Periods

Provisional taxpayers must make two compulsory payments per tax year, with an optional third payment:

• First period (IRP6): Due within six months after the start of the tax year. For individuals with a February year-end, this is due by 31 August
• Second period (IRP6): Due by the last day of the tax year. For February year-end taxpayers, this is due by the last day of February
• Third period (voluntary top-up): Due within seven months after the tax year-end (30 September for February year-end taxpayers). This allows you to top up if your estimate was too low, avoiding underestimation penalties

Companies follow the same structure but based on their specific financial year-end date.

How to Calculate Provisional Tax

Your provisional tax payment is based on an estimate of your taxable income for the full year. The calculation involves:

1. Estimate your total taxable income for the full 12-month tax year
2. Apply the applicable tax rates (individual tax tables or company rate of 27%)
3. Subtract any employees’ tax (PAYE) already deducted by employers during the year
4. Divide the remaining liability across the payment periods

For the first period, you must pay at least 50% of your estimated total tax liability (less PAYE credits). For the second period, you must pay the remaining balance.

Penalties for Late Payment or Underestimation

SARS imposes penalties in two situations:

• Late payment penalty: 10% of the amount due if payment is not made by the deadline
• Underestimation penalty: If your estimate for the second period is less than 80% of your actual taxable income (or less than 90% for taxpayers with taxable income exceeding R1 million), SARS may impose an additional penalty of up to 20% of the difference

Interest is also charged on late payments at the prescribed rate published by SARS.

Provisional Tax for Companies

All South African companies are provisional taxpayers. The corporate income tax rate is 27% (effective for years of assessment ending on or after 31 March 2023). Companies must:

• Submit IRP6 returns for both provisional tax periods
• Base estimates on reasonable projections of taxable income
• Ensure the second period estimate is within the 80% accuracy threshold

Filing Provisional Tax Returns

Provisional tax returns (IRP6) are submitted through SARS eFiling. The process requires:

1. Log in to your SARS eFiling account
2. Navigate to Returns and select Provisional Tax
3. Complete the IRP6 form with your estimated taxable income
4. Submit the return and make payment via EFT or at a bank

How Khwalo and Associates Can Help

Accurate provisional tax estimation requires careful financial planning and knowledge of current tax rates and thresholds. Getting it wrong can result in penalties or cash flow problems. Khwalo and Associates assists provisional taxpayers in East London and across South Africa with:

• Calculating provisional tax estimates based on current financial performance
• Submitting IRP6 returns on time via SARS eFiling
• Managing cash flow planning around provisional tax payment dates
• Reviewing estimates to avoid underestimation penalties
• Handling SARS queries and disputes related to provisional tax

Contact our East London office at 043 726 8134 or email luyanda@khwalo.co.za for professional assistance with your provisional tax obligations.