Provisional taxpayers will know that they need to submit their second provisional tax payment by February 28. New (and proposed – not yet enacted) laws have changed the rules governing provisional taxes, and have codified penalties for underestimating provisional tax.
Estimating your provisional tax
Remember that different rules apply according to whether your taxable income exceeds R1m or not –
Changes to provisional tax rules – the good news
Penalties – the bad news
An automatic penalty of 20% of the underestimated amount will be levied by SARS. The days of trying to convince SARS officials that there were valid reasons for underestimating your provisional tax are gone.
Plan your provisional payment and get professional advice!
Thus, while it will be easier to estimate provisional tax, the 20% underestimation penalty will automatically kick in. The Commissioner may waive the penalty if you can convince SARS that your provisional tax was “seriously calculated” and not deliberately or negligently understated taking into account factors available at the time you made your payment. However, you are now arguing from a position of weakness as the penalty must be paid upfront – the Commissioner will have your money and convincing SARS to refund the penalty will no doubt be a time-consuming and potentially costly exercise.
So, take time to ensure that your provisional payment is accurate enough to avoid penalties. This is a time where it is worth speaking to your accountant.
Lastly, don’t forget if you have made capital gains in the tax year, these must be included in your provisional estimate.
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