If you only earn a salary from one employer, your tax life is simple. Your employer deducts PAYE, gives you an IRP5, and you file your return.
But what if you earn other money? What if you have a side hustle, rent out a flat, or earn interest from investments?
This is where "provisional tax" comes in, and it's a concept many South Africans find confusing. Being a provisional taxpayer isn't a choice; it's an obligation. If you meet the criteria and fail to register and pay, you will face penalties from SARS.
So, are you one? Let's find out.
What is Provisional Tax, Anyway?
Provisional tax is not a separate tax. It's simply a mechanism to pay your normal income tax bill in advance.
Instead of paying one large lump sum to SARS at the end of the year, you pay at least two instalments (via an IRP6 return) based on your estimated income for the year.
- First Payment: Due by 31 August
- Second Payment: Due by 28/29 February
You Are a Provisional Taxpayer IF...
You are automatically a provisional taxpayer if you earn any income that isn't a "remuneration" (like a salary) OR if you are a director of a company.
The most common examples include:
- Freelancers, Independent Contractors, and Sole Proprietors: If you get paid for your work without being on a company's payroll (i.e., they don't deduct PAYE), that income is not remuneration, and you are a provisional taxpayer.
- Landlords: You earn rental income from a property you own.
- Business Owners: You are a director of any private company (Pty) Ltd or a member of a Close Corporation (CC), even if you also earn a salary from that company.
- Investors/Interest Earners: You earn significant income from interest, dividends, or other investments.
The R30,000 Exemption Rule
There is one major exception. You do NOT have to register as a provisional taxpayer if:
- Your total non-remuneration income (from interest, dividends, or rent) for the entire year is less than R30,000; AND
- You are not a director of a company or member of a CC.
Let's use some examples:
- Sarah: Works a full-time job (gets an IRP5). She also has a small savings account that earns R2,000 in interest for the year.
- Result: Sarah is NOT a provisional taxpayer. Her non-remuneration income (R2,000) is well below the R30,000 threshold. She will just declare this interest on her final ITR12.
- David: Works a full-time job (gets an IRP5). On the side, he does freelance web design and earned R50,000 this year.
- Result: David IS a provisional taxpayer. His non-remuneration income (R50,000) is over the R30,000 threshold. He must register and file IRP6 returns.
- Mary: Rents out a flat and earns R8,000 a month in rent (R96,000 a year). She has no other job.
- Result: Mary IS a provisional taxpayer. Her income is from letting property and is over the R30,000 threshold.
- Thabo: Started his own small business as a (Pty) Ltd. He is the only director. He doesn't earn any other income.
- Result: Thabo IS a provisional taxpayer, simply because he is a director of a company, regardless of his income level.
Why Does This Matter?
If you are a provisional taxpayer and you don't register or pay, you can face two types of SARS penalties:
- Late Payment Penalties (IRP6): A 10% penalty on the amount you failed to pay by the August or February deadlines.
- Under-estimation Penalties (ITR12): A penalty of up to 20% if your final tax bill (on your ITR12) is significantly higher than the provisional payments you made.
What to Do Next
- Check Your Status: Look at the criteria above. Do you earn freelance income? Rental income? Are you a director? Is your non-salary income over R30,000?
- Register on eFiling: If you are a provisional taxpayer, you must register for it on your SARS eFiling profile. This will give you access to the IRP6 return.
- Track and Calculate: This is the hard part. You need to track all your non-salary income and expenses throughout the year to accurately estimate your tax payments.
This is exactly why TaxClaw.ai exists. Our tool is designed for freelancers, landlords, and small business owners to seamlessly enter income, expenses, and calculate your provisional tax liability in real-time. You'll never have to guess what you owe SARS again.
Disclaimer:This article is for informational purposes only and does not constitute financial or tax advice. Tax laws are complex and subject to change. We strongly recommend consulting with a registered tax practitioner to address your specific circumstances. TaxClaw.ai is a tool to assist you in managing your tax obligations and is not a substitute for professional advice.
