What is provisional tax, who is liable to register for it and how is it calculated?

What is provisional tax?

Provisional tax is an aid provided by SARS to allow you to pay your annual tax in two or three payments instead of everything at once upon the submission of your income tax return.

When do I declare and pay provisional tax?

Taxpayers who are liable to declare and pay provisional tax needs to submit their returns twice a year, with the option of a third provisional tax declaration as well. The first return will be due 6 months after your financial year has started – For individuals and companies with a February year-end, this would be August each year. The second return would be due 12 months after your financial year has started – For individuals and companies with a February year-end, this would be February.

The calculation will be the actual figures for the first 6 months of the year, estimated over a 12-month period using average figures and drawn up budgets to get as close as possible to the provisioned profit over 12 months. The tax is then calculated on this taxable income/profit, and only half of the tax amount is then payable on the first provisional tax submission. The same calculation is then done in month 12 with more accurate figures, and the tax amount minus the amount paid with the first provisional tax submission is then due upon the second provisional tax submission.

A third provisional tax submission is then submittable within 7 months after the financial year-end – For individuals and companies with February year-ends this would be in September. The third provisional tax submission is completely optional and is only recommended if you need to submit a top-up payment to cover the tax for the period if you underestimated the taxable profit with your first and second provisional tax submissions.

Who is liable for provisional tax?

Companies & trusts are automatically liable for provisional tax and should keep their provisional tax returns and payments up to date to avoid penalties on either non-submission or underestimation of provisional tax.

Only certain individuals are liable to register and submit provisional tax returns. Individuals who earn income other than a salary or any income on which no income tax has been deducted should register for provisional tax. This includes interest from investments (above the threshold – R23,800 if you are below 65 and R34,500 if you are above 65), rental income, consulting/contracting fees which is not listed on a pay slip, if you are trading as a sole proprietor, independent contractors, etc.

Practical examples:

1.       Companies

Suppose the company’s year-end is February 2026, this would mean the financial year is from March 2025 to February 2026, and we are submitting the first provisional tax return in August 2025. The taxable profit as at end of July 2025 is R300,000 (5 months into the year).

The calculation would be as follows:

• R300,000 / 5 months * 12 months = R720,000. This is what we estimate the taxable income will be by February 2026.

• R720,000 * 27% (standard company tax rate, not Small Business Corporation) = R194,400

• R194,400 * 50% = R97,200. This is then the amount if tax which will be due in August 2025.

  
  

Now we get to January 2026 and the taxable income is 850,000 (11 months into the year)

• R850,000 / 11 months * 12 months = R927,272

• R927,272 * 27% = R250,363

• R250,363 – R97,200 (first provisional tax)= R153,163. This would then be due in February 2026.

Let’s say we got to January 2026 and the taxable profit was R500,000. This would of course mean that we overestimated the taxable profit in August 2025, so we will pay a lot less in second provisional than in first provisional:

• R500,000 * 27% = R135,000

• R135,000 – R97,200 = R37,800. This would then be due in February 2026.

2.       Individuals

Suppose the individual is below 65 years of age, has a rental profit of R50,000, interest earned of R9,000 and a gross salary earned of R200,000 on which the employer already deducted R30,000 PAYE by July 2025.

• The interest is R9,000 / 5 months * 12 months = R21,600 which is under the threshold of R23,800 so there will be no tax implication

• The salary of R200,000 + rental profit of R50,000 over 12 months = R600,000

• The PAYE already deducted is R30,000 / 5 * 12 = R72,000

First provisional tax:

• ((R600,000 – R512,800) * 36%) + R121,475 = R152,867

• R152,867 – R17,235 = R135,632 (primary rebate)

• R135,632 – R72,000 = R63,632 (PAYE)

• R63,632 * 50% = R31,816 which will be due in August 2025 for the first provisional tax submission.     

The same calculation will then be done in February 2026 for the second provisional tax submission as used in the example for companies.

Interesting facts:

1. Individual taxpayers who are not registered for provisional tax must submit their annual income tax returns between July and October each year. Provisional taxpayers can submit between July and January of the following year.

2. SARS automatically registers / deregisters you for provisional tax based on the information submitted on your income tax return, but you can also voluntarily register for provisional tax.

3. SARS levies an underestimation of provisional tax penalty on the submission of your income tax return if the taxable income on your second provisional tax submission is lower than the taxable income on your income tax return submission. The calculation differs depending on whether the taxable income is more or less than R1mil.  

4. SARS then further levies interest on the late payment of provisional tax which can be avoided if you submit a top-up payment with your third provisional tax submission.

5. Individuals whose taxable income is below the tax threshold (R95,750 per annum in 2024 – 2026) are not liable for provisional tax.

6. Public Benefit Organizations are exempt from provisional tax.

   
   

Do not hesitate to reach out for any enquiries or uncertainties. We are here to assist!

Best regards,

Simónne Roodt (SAIPA)

CEO and Director

OPTIMUM RATIO