The August 31 deadline is fast approaching and it is important that as a provisional taxpayer you make your first payment on time, and that you pay the right amount.
Generally, it is acceptable to base your provisional tax payment on the "basic" amount. This is the amount of taxable income reflected on your last tax assessment.
However, there is a provision in the legislation that allows the South African Revenue Service (SARS) to increase the amount on which you base your provisional tax payment.
In the past, SARS has not tended to use this provision. However, I understand SARS intends to apply the provision in certain circumstances.
These are set out as being applicable if it is anticipated by SARS that your revised taxable income, as an individual, will exceed R1,5 million, or, for a company or close corporation (CC), will be more than R2 million:
* If the taxpayer is a company or CC and it has been involved in a merger, acquisition or other transaction, which may have resulted in its taxable income being significantly increased; or
* The basic amount is more than two years old.
Thus, for example, if your company's basic amount is more than two years old and its taxable income more than R2 million, SARS will probably wish to re-estimate its taxable income to a figure higher than the basic amount.
SARS will contact you to tell you that it is intending to revise the amount on which your, or your company's/CC's provisional tax is based and that you have fourteen days to submit a revised estimation. You may then make submissions as to why the basic amount is a reasonable reflection of the anticipated taxable income for the year, or submit a reasonable estimate of what you anticipate the taxable income will be.
Clearly, if the amount on which the provisional tax is based is increased, it will be necessary for you to make an additional payment. Provided you have put your return in on time (and for the second payment, it has been based on at least the basic amount) there will be no penalties imposed directly as a consequence of the re-estimate, and the amount of provisional tax which you are required to pay being increased. (This applies to both the first and the second provisional tax payments.)
Interest will, however, be payable from the date set for the payment of the additional amount.
Generally, as I understand it, SARS will allow you fourteen days from the date of the re-estimate, to pay the tax on the increased amount. In addition, if you don't pay the tax on the difference between the amount submitted as being the taxable income and the amount that has been estimated as being the taxable income, by the date set by SARS, it may impose a 10 percent penalty for late payment.
It is important to be aware of these issues as you prepare your provisional tax form, so that you are aware of your exposure to a re-estimate by SARS and what you need to do should SARS exercise its right to perform the re-estimation.