PROVISIONAL TAX:

Written by: Mahomed Kamdar, TaxSpecialist at SAIPA

Paying provisional tax reduces the cash burden on the taxpayer when the tax return for the year is submitted. Deciding whether a taxpayer qualifies as provisional can be complicated, as multiple issues must be considered.

Who is a provisional taxpayer

A provisional taxpayer is any person who receives income that is not defined as remuneration. (truly) independent consultant is a provisional taxpayer because there are no employee/employer relations and,
therefore, no `remuneration’ will be paid, but rather a consultative fee.

Examples of remuneration are salaries, leave pay, wages and bonuses. If the only source of income is remuneration, the individual will not be a provisional taxpayer, as tax on remuneration is paid promptly via the PAYE mechanism.

When determining who should pay provisional tax, it is helpful to decide who is not a provisional taxpayer.

The receipt of the following exempt income does not make an individual a provisional taxpayer:

• If an individual receives interest of less than R23 800 and is under 65; or
• If an individual receives interest of less than R34 500 and is under 65 and older ; or
• If an individual receives an exempt amount from a tax-free savings account; or
• If an individual receives an exempt dividend in accordance with s10(1)(i) of the ITA.