Provisional tax isn't a separate tax, and that misunderstanding is where most of the confusion starts. It's simply a way of paying your normal income tax in advance, in instalments, so you're not hit with one enormous bill at assessment. If you earn income that isn't taxed through PAYE — company profits, rental, freelance or business income — SARS wants its money during the year, not eighteen months later. The mechanics are two compulsory payments a year, each based on an estimate you make, with a penalty if your February estimate is badly wrong. This guide walks through the deadlines, the calculation, the penalty rules and the mistakes that cost owners money.

What provisional tax actually is

Provisional tax is a payment mechanism, not a new liability. You estimate your taxable income for the year, work out the tax on it, and pay it in instalments during the year. At assessment, your actual income tax is calculated on your ITR12 (individuals) or ITR14 (companies), and the provisional payments you've already made are credited against it. Overpay and you're refunded; underpay and you settle the balance — possibly with a penalty. The provisional returns themselves are filed on an IRP6.

2 + 1
Two compulsory payments — around end-August and end-February — plus an optional third around end-September to mop up interest.

Who has to pay it

Every company is automatically a provisional taxpayer — there's no opt-out. Any individual who earns taxable income that doesn't come from a salary is one too: a business, a side trade, rental income, or investment income above the exclusion. If that's you, you're a provisional taxpayer whether or not SARS has written to tell you so — the obligation is triggered by your income, not by a letter. The common trap is a salaried person who starts a side business and doesn't realise they've just become provisional.

The two deadlines you can't miss

  • First payment — end of August (six months into the tax year): pay at least half your estimated tax for the year.
  • Second payment — end of February (tax year-end): top up so you've paid your full estimated liability for the year.
  • Optional third — end of September: a voluntary top-up, after year-end, to stop interest building if you turned out to have underpaid.

Miss a provisional deadline and SARS charges a late-payment penalty and interest automatically — there's no warning letter first. Put both dates in your calendar the day your tax year starts, and diarise them a fortnight early so the cash isn't a surprise.

The "basic amount" — SARS's fallback benchmark

For the first payment, and as a safety net for the second, SARS uses your basic amount — broadly your taxable income from your latest assessment. If that assessment is more than about eighteen months old by the time you file, the basic amount is escalated by a set percentage a year to bring it up to date. The basic amount matters because it's one of the safe-harbours: pay against it correctly and you're protected from the under-estimation penalty even if your actual income comes in higher. In practice, that makes the basic amount your floor for the first payment.

Working out the first payment

Worked example

First payment for a R400,000-profit company

A company expects R400,000 taxable profit for the year. Company tax at 27% is R108,000. The first provisional payment, due end-August, is at least half of that — R54,000 — provided the estimate is at least the basic amount from the last assessment. Pay that by the deadline and the first payment is dealt with; the second payment in February tops up to the full year's liability once the estimate is refined on the latest figures.

The second payment and the under-estimation penalty

The February estimate is the one that carries the risk. Under-estimate your taxable income badly and SARS levies a 20% under-estimation penalty on the shortfall, unless you land inside a safe-harbour. The safe-harbours, broadly, are:

  • If your taxable income is R1 million or less: you're safe if your estimate is at least 90% of your actual taxable income, or at least 100% of the basic amount from your last assessment.
  • If your taxable income is above R1 million: the basic-amount safety net falls away — you need your estimate to be at least 80% of your actual taxable income.
Worked example

The penalty on a big under-estimate

A company's actual taxable income turns out to be R1.2 million — over the R1m line, so the 80% rule applies. Tax on 80% of R1.2m (R960,000) at 27% is R259,200. The company's February estimate was only R600,000, so its second-payment provisional tax was based on R162,000. The shortfall SARS penalises is R259,200 − R162,000 = R97,200, and the 20% penalty is R19,440 — on top of the tax still owed. Estimate to at least 80% of the real figure and that penalty simply doesn't arise.

This is exactly why the February estimate is a job for someone who's seen the numbers, not a finger in the air. The safe-harbours reward an accurate estimate and punish a hopeful one.

Late payment: a separate 10% penalty plus interest

Don't confuse the under-estimation penalty with the late-payment one. They're different, and you can cop both. If you pay a provisional amount late — even the right amount, a day after the deadline — SARS adds a 10% late-payment penalty on that payment, plus interest for the period it's outstanding. So there are two ways to get stung: paying the right amount late (10%), and estimating too low (20% on the shortfall). Getting the amount right and paying it on the day avoids both.

Common mistakes owners make

  • Not realising they're provisional at all. A salaried person starts freelancing or renting out a flat, earns non-salary income, and never registers — then gets hit with backdated penalties.
  • Low-balling the February estimate to ease cash flow, then paying the 20% under-estimation penalty on the shortfall.
  • Paying the right amount a day late and copping the 10% late-payment penalty for the sake of a diary reminder.
  • Forgetting the annual return. Provisional tax is payment in advance — the ITR12 or ITR14 still has to be filed, and the account is squared up there.
  • Estimating on gut feel. Without current books, the estimate is a guess, and a guess is what triggers penalties.
  • Ignoring the optional September top-up when they know they've underpaid, letting interest build instead of stopping it.

How to handle provisional tax cleanly

  1. Confirm you're a provisional taxpayer — every company is; individuals are once they earn meaningful non-salary income
  2. Register for provisional tax on SARS eFiling if you're not already flagged
  3. Keep your books current through the year so each estimate rests on real figures, not guesswork
  4. File the first IRP6 and pay at least half your estimated tax by end-August (and at least the basic amount)
  5. File the second IRP6 and top up to your full estimated liability by end-February — aiming inside the safe-harbour (90% of actual or 100% of the basic amount under R1m; 80% of actual over R1m)
  6. Use the optional third payment around end-September if you underpaid, to stop interest building
  7. File your ITR12 or ITR14 annual return and settle any balance at assessment

How we handle it for clients

We keep your books current through the year, so each estimate is grounded in real figures rather than a finger in the air. We calculate both payments to land inside the safe-harbours, file the IRP6 returns, and tell you what to pay and when — far enough ahead that the cash isn't a shock. The result is no under-estimation penalties, no late-payment penalties, and no eighteen-month surprise at assessment.

A worked example for an individual

Companies aren't the only provisional taxpayers — the rules bite hardest on individuals who don't expect them.

Worked example

The salaried employee with a side business

You earn a salary taxed through PAYE, and on the side you run a consulting business that clears R300,000 profit this year. That R300,000 isn't taxed at source, so you're a provisional taxpayer on it. You estimate the tax on your total income — salary plus side business — subtract the PAYE already deducted on your salary, and pay the difference across the two provisional dates. Forget to register and that first assessment arrives with the tax and backdated penalties and interest. The side income is the trigger, even though most of your money runs through PAYE.

Registering as a provisional taxpayer

Companies are flagged automatically. As an individual, you register on SARS eFiling — in practice by activating provisional tax on your profile so the IRP6 returns become available to you. The honest advice is to do it the moment you start earning non-salary income, not the year afterwards. SARS works backwards from your actual income at assessment, so "I didn't know I had to" doesn't stop the penalties — it just means they arrive all at once.

If provisional tax has been a twice-yearly source of stress — or you've just realised you should have been paying it — talk to us. We'll get you registered, work out your position, and take the two deadlines off your plate for good.