An update on new second provisional tax requirements Print

AN UPDATE ON NEW SECOND PROVISIONAL TAX REQUIREMENTS


In our December 2008 newsletter, we included an article on the proposed changes to the requirements for second provisional tax returns for the tax year commencing 1 March 2009. The new requirements, as announced by the South African Revenue Service (SARS), required companies, close corporations, individuals and trusts to estimate their taxable income for the second provisional tax payment within 80% of the actual income for the year.

This new requirement was felt to be onerous on the taxpayer as it differs from the old requirements which were based on the taxable income of the most recent assessment from SARS.  The new requirements for estimates used in provisional tax calculations will require the taxpayer to have their tax affairs up to date before the financial year end, in order to ensure that their estimated taxable income is within 80% of the final taxable income for the year.

In submissions made to the Standing Committee on Finance (SOFC), a two-tier system for second provisional tax assessments was proposed:

Tier 1: Smaller taxpayers: A return to the old 'basic amount' safe-harbour system, which includes the 20% penalty for estimating below the lesser of 'basic amount' and 90% of actual taxable income. However, the 'basic' amount will now include an automatic annual 8% increase.

Tier 2: Larger taxpayers: The current requirement of 80% of actual taxable income will be retained, but the 20% penalty will be made discretionary rather than automatic. This means that SARS will no longer be able to apply an automatic penalty and would have to give due consideration to whether the taxpayer intended to delay the payment of provisional taxes. This is a welcome relief for corporate taxpayers who would otherwise have to disclose such penalties in their financial statements pending an appeal to SARS.

Differentiation: Smaller taxpayers will mean taxpayers with a taxable income up to R1million.
According to National Treasury’s response document to Parliament, the R1million threshold will place 90% or more of provisional taxpayers by volume in Tier 1.

Should you have any queries on the above requirements, please do not hesitate to contact the partner who attends to your tax affairs, on 021 405 8500.
 
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