Presented by Mphagahlele Ndlovu CA (SA), MCom Taxation (Wits)
18 February 2016
Objectives:
A.
Define who pays provisional tax
B.
Timing of provisional tax
C.
How to calculate provisional tax
D.
E.
Calculate ESTIMATE
Discuss and calculate provisional tax for
 Natural persons
 Companies
F.
Calculate penalties & interest



Person who RECEIVES income that is
NOT
- Remuneration
- Allowance
- Advance
Company
Who is NOTIFIED by Commissioner
◦ Excl
 PBO, Recreational clubs and body corporates
NB!!!


2016 YOA - par 18(1)(c)
From the 2016 year of assessment, the exemption
from the payment of provisional tax will be aligned
for all natural persons. A natural person who does
not derive income from the carrying on of a business
will be exempt from provisional tax, if: his taxable
income for that year will not exceed the tax
threshold, or his taxable income from interest,
foreign dividends and rental from the letting of fixed
property will not exceed R30 000 (par 18(1)(c)). (If
there is no taxable portion of investment income left
after, for example, taking into account the applicable
interest exemptions (s 10(1)(i)) and only taxable
remuneration remains, the person will not be
regarded as a provisional taxpayer.)
2017 year of
assessment
2016 year of
assessment
1 March
2015
31 Aug
2015
6 months after y/e
Year end
y/e + 7 months
(unless not Feb Year end= 6 months)
29 Feb
2016
30 Sep
2016
31 Aug 2015
1st payment
Estimated tax liability for year
◦ Calculate the tax payable.
◦ Divide the tax payable by two.
◦ Deduct foreign tax and other taxes paid
such as Employees Tax (on companies
behalf)
◦ Refer to par 19 and 20 for individuals
PAY OVER to SARS if applicable
2nd payment
Estimated tax liability for year
◦ Calculate the tax payable
◦ DEDUCT first payment
◦ Deduct foreign tax Deduct foreign tax and
other taxes paid such as Employees Tax (on
companies behalf)
PAY OVER to SARS if applicable
3rd payment
ACTUAL tax liability
◦ Calculate the tax payable
◦ Deduct first and second payment
◦ Deduct foreign tax and other taxes paid
such as Employees Tax (on companies
behalf)
PAY OVER to SARS if applicable BEFORE
EFFECTIVE date
1st PAYMENT :
Can use real estimate or Basic amount
However the estimate Must not be < than Basic Amount.
A lower estimate may be submitted only with the Commissioner’s
approval.
2ND PAYMENT :
Depends on your taxable income:
TI R1m or less= Choose Real estimate or Basic Amount
TI over R1m= Have to use a real estimate
Basic Amount
(taxable income is R 1 million or less )
=Taxable income for latest preceding YOA less
- Taxable capital gains incl in s 26A
- any taxable portion of any lump sum ito s1 G.I – para(d) and (e) incl

‘the latest preceding YOA’ means the latest of
the years of assessment
- preceding the YOA for which the estimate
was made , and
- for which a notice of assessment has been
issued by the Commissioner not less than 14
days before the date on which the estimate
was to be submitted to the Commissioner.
◦ If SARS issued a taxpayer with a return and
indicated a taxable income
NB!!!


2016 YOA – par19(1)(d)(bbA)
From 1 March 2015 any amount (other than a
severance benefit) included under par (d) of
the gross income definition in s 1 (this
includes once-off or irregular awards
received from an employer ) will also be
excluded from the estimate of the basic
amount. This exclusion is aimed at excluding
any irregular or once-off payments from the
estimate of the basic amount.
NB!!!


2016 YOA – (proviso to par 19(1)(e)(ii))
The 14-day rule will be strictly applied for years
of assessment commencing on or after 1 March
2015 with the deletion of this provision. This
proviso is deleted to prevent e-filing users from
accessing the provisional tax function long
before the final date of payment and then using
the basic amount generated by the system at that
stage to make their provisional tax payment and
in doing so trying to avoid the application of the
14-day rule.
NB!!!


2016 YOA – par 19(1)(d)
The basic amount (used to estimate the
taxable income for both the first and second
provisional
tax
payments)
should
be
increased by 8% a year if the basic amount
must be estimated more than 18 months
after the preceding year of assessment
(proviso to par 19(1)(d)).
X’s year of assessment ends on 28 February
each year. X must submit a first period
provisional tax estimate for the 2015 year of
assessment on 29 August 2015. For the 2012
year of assessment, a notice of assessment
was issued on 30 June 2012. X’s taxable
income as assessed in 2012 was R170 000.
The 2013 and 2014 returns have not yet been
submitted. Taxable income as assessed in
2012 included a taxable capital gain of R10
000 and a severance benefit of R20 000.
Adapted from SARS interpretation note 1
Taxable
More
than
R1millio
n
Income
1st
payment
Basic amount
Real estimate (not
lower than Basic)
Basic
R1mill
or Less
amount
Real estimate (not
lower than Basic)
More than
R1million
Taxable
Income 2nd
pmt
R1mill or
Less- base
it on the
lower of :
Real
estimate
Basic
amount
Real
estimate
1st payment
-
Penalties:
10% of amount not paid per par 27(1)
-
Interest- Late Payment
If the amount prescribed is not timeously paid in
full, interest (at the prescribed rate) is payable on
the portion of the amount not paid in full, for the
period that the amount remains unpaid
s 89bis(2)
(now s187,s188 s189 of Tax Admin Act)
2nd Payment
 Penalties ito par 27(1) @10% of amount not
paid
-
Interest- Late Payment
If the amount prescribed is not timeously paid in
full, interest (at the prescribed rate) is payable on
the portion of the amount not paid in full, for the
period that the amount remains unpaid
(s 89bis(2)).
(now s187,s188 s189 of Tax Admin Act)



Year –end estimate inadequate
(par 20)
Tier 1: Taxable income =/ <R1m
If 2nd pmt is less than



NB!!!
The basic amount AND
90% of the actual taxable income for the yoa
Then a discretionary penalty of 20% of the difference between


the normal tax on the taxable income in his estimate and
The lesser of:
 the normal tax on 90% of the actual taxable income for the year.
 The normal tax calculated on the basic amount at the rates applicable to that year
 If
both par 20 penalty and a par 27 penalty have
been issued in the same provisional tax period , par
20 penalty will be reduced by par 27 penalty.
(Effective from yoa commencing 1 March 2015)
NB!!!

2016 - The penalty for the late year-end estimate
levied under par 20A is repealed effective for years of
assessment commencing on or after 1 March 2015.
Paragraph 20A is deleted to align the provisional tax
penalties with the approach of the Tax Administration
Act under which a taxpayer may not be subjected to
both a non-compliance penalty (as in par 20A and
par 27 for late payment) and a penalty for an
underestimate (as is levied under par 20). Paragraph
20A has therefore been deleted and par 20 has been
amended to allow for the reduction of the par 20
penalty paid with the penalty levied under par 27 for
the late payment of provisional tax.




Par 20 penalty example
ABC (Pty) Ltd submitted a second period estimate of R4,5
million on 1 July 2015 and also paid the tax due of R630 000
[(R4,5 million × 28%) – (R560 000 + R70 000)] on this date.
The due date for submission of the estimate and payment of
the related tax was 30 June 2015.
On 8 July 2015 the Commissioner requested ABC (Pty) Ltd to
justify the second period estimate. The Commissioner was
not satisfied with the estimate and increased the estimate to
taxable income of R5 million. On 15 July 2015 SARS issued an
additional assessment which required a further payment of
R140 000 [(R5 million × 28%) – (R560 000 + R70 000 + R630
000)] by 29 July 2015. ABC made the payment on 29 July
2015.
On assessment, ABC’s taxable income was finally determined
as R7 million. No employees’ tax was paid during the year.

A taxpayer who is aggrieved by an assessment may
object to the assessment
◦ SARS issues a tax payer with an assessment and the tax
payer can either accept the assessment, or object to the
outcome of the assessment by lodging an objection.



The objection may be allowed or disallowed or
partly allowed
The taxpayer can then lodge an appeal against the
decision within 30 working days of the date on the
letter notifying of the objection been disallowed
Thereafter, recourse to ◦
◦
◦
◦
Tax Board / Tax Court
High Court
Supreme Court of Appeal
Constitutional Court for constitutional matters
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An objection must be:
 Lodged within 30 business days after the date of
assessment
 Lodged in the prescribed form
 Specify the grounds of objection in full
 Specify an address at which the taxpayer will
accept notice and delivery of documents for
purposes of the dispute
 Signed by the taxpayer or duly authorised
representative
 Delivered at the SARS address specified for this
purpose in the assessment
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Objection & appeal
process does not
automatically suspend
the obligation to pay
Suspension of payment may
be granted upon request in
specific circumstances
SARS collection steps are
prohibited during
consideration of
suspension request and
10 days after revocation
notice, except in narrow
circumstances
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