Provisional Tax: The Two Dates You Can't Miss

Provisional tax is one of those things nobody explains when you start a business — you just get a penalty one day and work out the hard way that it existed. Let's fix that. If you run a company, or you earn income that isn't taxed at source, SARS wants its money in advance, twice a year, on an IRP6 return. It isn't a separate tax — it's just paying your normal income tax in instalments instead of one lump. But miss a date or lowball an estimate, and the penalties are steep and stack fast. Here's exactly how it works, and where people get caught.

First: are you even a provisional taxpayer?

Every company is a provisional taxpayer, automatically. No opting out, no threshold. If you trade through a Pty Ltd, this is you. Individuals are provisional taxpayers if they earn income that isn't salary — rental income, sole-proprietor business profits, significant investment income, freelance work. If every rand you earn is a salary with PAYE already deducted, you're generally off the hook. Somewhere in between? That's exactly where people get surprised, so if you have any side income, check.

The two dates that matter

Provisional tax has two compulsory payments a year, both filed on an IRP6:

End of August — the first payment, at least half of your estimated tax for the full year.
End of February — the second payment, topping up to your full estimated liability for the year (less what you paid in August).

There's also an optional third payment at the end of September the following year — a voluntary top-up to settle any shortfall before interest builds. More on why that one earns its keep in a moment.

These are payment deadlines, not filing-season deadlines. Provisional tax happens twice a year regardless of when your ITR12 or ITR14 is due. People conflate the two, assume 'my return isn't due yet', and sail straight past an August payment. Don't.

How to estimate — and the safe-harbour rules that protect you

Each payment is based on your estimate of taxable income for the year, and this is where people trip up. The August payment is relatively forgiving. The February second payment is where the real penalty lives, because that's the one SARS tests against your actual final income. Get it materially too low and you face a 20% under-estimation penalty on the shortfall.

But there are 'safe harbours' — hit one and no under-estimation penalty applies, even if you were low:

Taxable income of R1 million or less: you're safe if your February estimate is at least 90% of your actual final taxable income, OR at least equal to your 'basic amount' (broadly, the taxable income from your last assessment, escalated).
Taxable income above R1 million: the basic-amount safety net falls away — you must estimate at least 80% of your actual income to avoid the penalty.

20%

Under-estimation penalty on the shortfall if your second-payment estimate misses the safe harbour

Separately, paying late — after the deadline, whatever the estimate — attracts a 10% late-payment penalty plus interest. So there are two distinct ways to get stung: paying too little, and paying too late. You want to dodge both.

Worked example

Lowballing the February estimate

Your company has a strong year and ends up with R800,000 actual taxable income — tax at roughly 27% is about R216,000. Because you're under R1m, the safe harbour is 90% of actual, i.e. R720,000, on which tax is about R194,400. But at February you estimated R400,000 to keep cash in the bank, paying about R108,000. You missed the safe harbour, so the 20% penalty is charged on the difference: 20% of (R194,400 − R108,000) ≈ R17,280 — plus interest — on top of the tax you still owe. The cash you 'saved' in February you handed back in penalty. Estimate honestly.

The September top-up: your safety net

If you had a bumper year and suspect your February estimate was light, the voluntary third payment at the end of September lets you top up the shortfall. Pay it in time and you stop the interest clock on the underpayment. It won't reverse an under-estimation penalty in every case, but it's a sensible pressure valve — especially when your final numbers only became clear after February. If you owe, paying sooner is always cheaper than paying later.

Paying it: the practical mechanics

The estimate and the payment are two separate acts, and both have to happen by the deadline. You complete the IRP6 on eFiling, which calculates the tax on your estimated income, and then you actually pay — usually by SARS credit-push through your bank, or by EFT using the payment reference SARS generates. Two things trip people up here. First, filing the IRP6 without paying still leaves you with a late-payment penalty on the money. Second, the SARS deadline is the date the funds must have cleared, not the date you clicked pay — so don't leave a bank transfer to 4pm on the last day and assume it counts.

Diarise your two dates a week early, not on the day. Provisional deadlines fall at month-end, exactly when everything else in a business is also due — payroll, suppliers, VAT in some months. Give yourself the buffer to pull the numbers, file the IRP6 and let the payment clear.

Companies with little or no profit still have to file

A common and expensive myth: 'we barely made anything, so there's nothing to do.' Wrong. Every company is a provisional taxpayer, so you still submit the IRP6 even if the estimated tax is nil. Filing a nil or low return on time keeps you compliant. Simply not filing triggers administrative penalties for a non-submission — a charge for a return that would have cost you nothing to lodge.

How to keep it clean

Keep your bookkeeping current so your estimate is built on real numbers, not a finger in the air.
Diarise end-August and end-February now — treat them as fixed as a payroll run.
Estimate on the honest side, and aim to land inside a safe harbour. The penalty for under-estimating dwarfs the short-term cash-flow benefit.
Use the September top-up if a strong year has left you exposed.
If cash flow is tight around a deadline, talk to us before the date, not after — SARS has payment-arrangement options, but they shrink once you're already late.

Provisional tax is a discipline problem, not a hard one. A little planning saves a lot of penalty. If you'd rather not think about IRP6 returns and estimates twice a year, that's exactly the kind of thing we take off your plate. Book a discovery call and we'll make sure you never miss a date — or overpay just to be safe.

Frequently asked questions

Common questions

What happens if I miss the end-of-August provisional payment?

You'll face a 10% late-payment penalty on the amount due, plus interest until you pay. The August payment still has to be made — missing it doesn't roll into February. File the IRP6 and pay as soon as you can to stop interest building, and speak to us early if cash flow is the problem, because SARS has arrangement options while you're not yet in default.

How do I avoid the 20% under-estimation penalty?

Aim to land inside a safe harbour on your February estimate. If your taxable income is R1m or less, you're protected when your estimate is at least 90% of your actual income, or at least equal to your 'basic amount' from your last assessment. Above R1m, you need to estimate at least 80% of actual. Basing the estimate on current, accurate books is the whole game.

Is the September top-up compulsory?

No. The end-of-September payment is voluntary. It exists so you can settle any shortfall from your February estimate and stop interest accruing. If your February payment was accurate and inside a safe harbour, you don't need it.

My company made almost no profit — do I still file provisional tax?

Yes. Companies are automatically provisional taxpayers, so you still submit the IRP6 even if the estimated tax is nil or very low. Filing a nil return on time keeps you compliant; not filing at all triggers administrative penalties for the missing return.

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Provisional tax: the two dates you cannot miss