Provisional tax is not a separate tax type. It is a method of paying normal income tax in advance during the year of assessment. The payments are credited against the taxpayer’s final income tax liability when the annual assessment is issued. It therefore helps prevent a large tax bill arising when the annual income tax return is assessed.
Who must pay provisional tax?
- Natural person:
A natural person will generally be a provisional taxpayer when earning income that is not fully subject to PAYE, such as:
- Business or professional income.
- Rental income.
- Investment income exceeding the permitted exclusion.
- Remuneration from a foreign or other employer not registered for PAYE.
- Income from freelance, consulting or independent activities.
A natural person who does not carry on a business will generally be excluded where:
- The taxable income does not exceed the tax threshold; or
- The taxable income from interest, dividends, foreign dividends, rental from letting fixed property and remuneration from an employer that is not registered for employees’ tax does not exceed R30 000.
Being a director of a private company does not, on its own, automatically make an individual a provisional taxpayer. The individual’s actual sources of income must be considered.
- Executive Directors are not provisional taxpayers
Executive directors are full-time, salaried employees (PAYE is deducted) of the company who are actively involved in day-to-day management. - Non-Executive Directors (NEDs) are provisional taxpayers
Non-executive directors are independent board members who provide objective oversight and governance. They do not manage daily operations and are not common-law employees of the company. They earn “directors’ fees”.
- Trusts:
A trust is generally a provisional taxpayer where it receives or accrues income other than remuneration and does not distribute all the taxable income to its beneficiaries.
This commonly includes the following types of income retained in the trust:
- Rental income.
- Interest or investment income.
- Business or farming income.
- Taxable capital gains.
Unlike a natural person, an ordinary trust does not qualify for the natural-person tax threshold or the R30 000 non-business-income exclusions.
- Companies:
A company is generally a provisional taxpayer unless it falls within a specific statutory exclusion.
Certain persons are specifically excluded from provisional tax.
These include the following:
- approved public benefit organisations,
- approved recreational clubs,
- qualifying body corporates,
- share block companies,
- certain associations of persons,
- deceased estates and
- some natural persons with relatively small amounts of non-salary income.
When must provisional tax be paid?
- For a natural person and a trust with a year of assessment running from 1 March to the end of February, the ordinary dates are:
- First payment: 31 August.
- Second payment: 28 or 29 February.
- Top-up payment: 30 September.
- The company’s provisional tax dates are determined by its own financial year-end.
- First payment: Within 6 months after the start of the year of assessment.
- Second payment: On or before the last day of the year of assessment.
- Third or top-up payment: 7 months after a February year end, OR 6 months after another year end.
Where a due date falls on a weekend or public holiday, submission and payment should be made on the preceding business day.
Provisional tax calculation / interest / penalties
| ISSUE | COMPANY | INDIVIDUAL | TRUST |
|---|---|---|---|
| Tax calculation | Company tax rate and applicable credits. | Individual tax tables, rebates, PAYE and applicable tax credits. | Applicable tax rules and available credits. |
| Section 89 quat threshold [Section 89 quat interest may arise where the final income tax liability exceeds the provisional tax, PAYE and other qualifying credits paid.] |
Taxable income exceeding R20 000.00. | Taxable income exceeding R50 000.00. | Taxable income exceeding R50 000.00. |
| ISSUE | COMPANY / INDIVIDUAL / TRUST |
|---|---|
| Section 89bis Late payment interest | May be charged on late first, second and third payments. |
| 10% Late payment penalty | May be charged on late first, second and third payments. |
| Paragraph 20 underestimation penalty. [Calculated at 20% of the tax shortfall determined under the statutory formula – NOT 20% of the understated income.] |
Taxable Income ≤ R1 Million: A penalty applies if your estimate is less than 90% of actual taxable income AND less than the “basic amount” (previous assessment).
Taxable Income > R1 Million: A penalty applies if your estimate is under 80% of actual taxable income. |
When and why may SARS examine a provisional estimate?
SARS does not have to wait until the annual income tax return is submitted before questioning a provisional estimate.
Under paragraph 19(3) of the Fourth Schedule, SARS may require a taxpayer to:
- Justify the provisional tax estimate.
- Provide details of income and expenditure.
- Submit supporting information and calculations.
- Explain the assumptions used in arriving at the estimate.
If SARS is not satisfied with the estimate, it may increase the estimate to an amount that it considers reasonable. The decision to increase the estimate under paragraph 19(3) is not subject to objection and appeal.
Although SARS does not publish a complete list of provisional tax audit triggers, practical risk indicators may include:
- A nil or unusually low estimate despite historically profitable operations.
- An unexplained reduction from the previous year’s taxable income.
- An estimate that is materially below the basic amount.
- Figures that do not agree with VAT returns, PAYE records, bank information or third-party data.
- Failure to include a known capital gain or once-off transaction.
- Large and unexplained changes between the first and second estimates.
- Repeated underestimation over several years.
- Estimates based on unsupported forecasts rather than current financial information.
Conclusion
Provisional tax is not an additional tax, but a system for paying normal income tax in advance. Companies, trusts and qualifying individuals should ensure that their estimates are reasonable, payments are made on time and supporting calculations are retained. Accurate and properly documented estimates reduce the risk of interest, penalties and queries or audits by SARS.
For assistance with the tax compliance of a trust, determining if a trust must deregister and for the deregistration of a trust, trustees can contact Adri Britz via email on abritz@fhbc.co.za.
Based on the Fourth Schedule to the Income Tax Act 58 of 1962 and the SARS Guide for Provisional Tax effective 29 June 2026, this article contains general information and does not constitute advice for a particular taxpayer.
Source:
Fourth Schedule to the Income Tax Act 58 of 1962
SARS Guide for Provisional Tax effective 29 June 2026