If you’re a South African expat with income sources back home, you’re likely familiar with the annual tax return process. However, another vital tax obligation often slips under the radar: provisional tax. This system ensures that individuals and businesses pay their income tax throughout the year rather than in a lump sum at the end of the tax year, making it easier to stay compliant if handled correctly.
Here’s what you need to know about provisional tax in South Africa as an expat tax resident working abroad or non-resident with South African income-bearing assets.
Who pays provisional tax in South Africa?
Generally, any individual or business entity that is a tax resident of South Africa with a taxable income above a certain threshold must pay provisional tax.
Who is a provisional taxpayer? Any person with income other than remuneration is a provisional taxpayer. As such, most salary earners are, therefore, not provisional taxpayers as long as they have no other sources of income.
Who doesn’t have to pay provisional tax in South Africa?
Individuals who only earn a salary or wage and have no other significant income sources do not need to pay provisional tax. This is because Pay-As-You-Earn (PAYE) deductions from their salary already account for their tax liability.
However, it’s important to note that even salary earners may need to register for provisional tax if they have additional income sources such as rental income, dividends, business income and capital gains.
How to calculate provisional tax in South Africa
Calculating provisional tax can get complicated, so you’re advised to call in the tax professionals. However, here is a basic overview of the process:
- Estimate your taxable income: This involves forecasting your annual income, considering salary, business income, rental income, and capital gains.
- Determine your tax liability: Use the South African tax tables to calculate the estimated tax you’ll owe.
- Make provisional payments: You’ll need to make payments in instalments, typically four times a year. SARS sets specific due dates for these payments.
SARS provisional tax dates 2024 and 2025
The filing season for provisional taxpayers runs from 15 July 2024 to 20 January 2025. Please note that these are the overall filing season dates. Specific payment dates for provisional tax instalments will be outlined in your tax return or can be obtained from SARS directly.
As for the 2025 tax year, the exact dates haven’t been officially announced yet, although we know from previous experience that we can expect a similar filing season timeframe as the year before. When in doubt, double-check – it’s always advisable to check the SARS website for communication directly from the revenue authority.
Read more: Tax advice for South African expats – avoid hot water this tax season with these SARS lifelines.
IRP6 provisional tax return
You’ll need to submit an IRP6 tax return to fulfil your provisional tax obligations. This form allows you to declare your estimated income and tax liability. You can submit the IRP6 electronically through eFiling, SARS’ online tax portal.
Read more: SARS streamlines tax filing process on eFiling for South Africans working abroad.
Provisional tax late payment penalty
One of the most significant risks associated with provisional tax is the late payment penalty. If you fail to meet the payment deadlines, SARS may impose a late penalty on your outstanding amount. The penalty rate can vary, so prioritising timely payments is essential.
Provisional tax penalties and interest
If late payment penalties aren’t bad enough, SARS may also charge interest on overdue amounts, which can snowball your tax liability. To avoid these penalties and interest charges, it’s vital to plan your tax payments carefully and ensure that you meet all deadlines strictly.
Do independent contractors pay provisional tax?
Affirmative! Independent contractors are at the top of the list of South Africans subject to provisional tax. Freelancers and contractors must understand their tax obligations and make timely payments to avoid penalties.
Don’t get caught unawares by the underestimation penalty.
If you underestimate your taxable income and, as a result, underpay your provisional tax, you may be subject to an underestimation penalty. This penalty is typically calculated as a percentage of the underpaid amount. Scary stuff!
FinGlobal: cross-border tax specialists for South African expats
It is a good idea to consult with a tax professional to accurately calculate your provisional tax liability, as provisional tax can be a complex area of South African tax law. If there are a lot of variables in your financial situation, it’s best not to DIY this one – FinGlobal can assist with understanding your obligations, calculating your tax liability accurately, and making timely payments to minimise your risk of penalties and interest charges.
If you have any questions about provisional tax, please contact us. Whatever you need help with, FinGlobal has got it covered.
- Email: info@finglobal.com
- Telephone (in SA): 028 313 5600
- Telephone (outside SA): +27 283 135 600