1. The document covers topics related to provisional tax in South Africa, including definitions, payment requirements, estimates, penalties, and calculations for individuals and companies. 2. A provisional taxpayer is defined as an individual deriving income other than remuneration or a company, and they must make one or two provisional tax payments per year depending on circumstances. 3. Penalties may be applied if provisional tax payments are underestimated compared to the taxpayer's actual taxable income for the year, with different penalty calculations depending on whether taxable income is above or below R1 million.

1. TAXATION 2021
presented by Masibulele Phesa CA(SA), RA
Provisional tax
Prescribed textbook: Notes on South African Income Tax

2. TOPICS COVERED
All sections are located in the 4th Schedule of the Income Tax Act:
– Par 1 – definitions
– Par 17 – Payment of provisional tax
– Par 19 – estimates of provisional tax
– Par 20 – penalty for underpayment of provisional tax
– Par 27 – Late payment penalty
– Par 21 - Provisional tax payment by taxpayer other than
companies
– Par 23 - Provisional tax payment by companies
– Par 23A – Third provisional tax paymen

3. INTRODUCTION
 Provisional Tax is defined in s1 in 4th Schedule as:
 any payment in respect of liability for normal tax
 required to be made in terms of paragraph 17 (of the 4th
Schedule)
 On assessment the following happens:
 Normal tax liability LESS Provisional tax payments LESS
Employees tax (if applicable) LESS rebates (if applicable), LESS
Medical Tax credits (if applicable) = Tax payable or refundable
 A taxpayer can be a provisional taxpayer AND be liable for
employees tax

4. INTRODUCTION
 How many payments (PMT) must be made and when?
1st PMT  after 6 months into year of
assessment (yoa)
2nd PMT  at end of yoa
3rd PMT  7 months after yoa if yoa is ends
on last day of Feb, 6 months in all other cases
 3rd PMT IS VOLUNTARY

6. Who is a Provisional Taxpayer?

7. Who is a Provisional
Taxpayer?
 Provisional taxpayer is defined in par 1 of the 4th Schedule
 A provisional taxpayer falls into one of the following categories (par
1 (a) – (c)):
 par (a):
A person (other than a company)  derives income by way
of amount that is not ‘remuneration’ as defined in par 1 or
allowance or advance under s8(1) OR
a person who derives ‘remuneration’ from an employer who
is not registered as an employer in terms of par 15 of the 4th
schedule will also qualify as a provisional taxpayer
 par (b): A company
 par (c): Any person notified by the Commissioner

8. Provisional Taxpayer
Exclusions
 Public benefit organisations
 Recreational clubs
 Body corporates, share block companies & income tax exempt
associations
 Deceased estates
 Natural person who does not receive income from carrying on a
business will be exempt if:
 His taxable income for that year will not be more than the tax
threshold or
 His taxable income from interest, dividends, foreign dividends,
rental income from property or remuneration from an employer
that is not registered as an employer for employee’s tax
implications  does not exceed R30 000.

9. How to calculate Provisional Tax
1ST PROVISIONAL TAX
Estimated taxable income for the year of assessment Rxxxx
Normal tax on estimated taxable income Rxxxx
LESS: Primary and/or secondary and/or tertiary rebate R(xxxx)
LESS: Medical tax credit – s6A R(xxxx)
LESS: Additional medical expenses tax credit – s6B R(xxxx)
Total tax payable (A) Rxxxx
Half of the normal tax payable on estimated taxable
income (A/2)
Rxxxx
LESS: Employees’ tax deducted for the 1st six month R(xxxx)
1ST PROVISIONAL TAX PAYMENT Rxxxx

10. How to calculate Provisional
Tax

11. How to calculate Provisional Tax
 Companies  ignore the following in the calculations:
 Primary/Secondary/ Tertiary rebates
 Medical tax credit – s6A
 Medical expense tax credit – s6B
 Individuals: normal tax determined using the individuals tax
tables
 Companies: normal tax  use 27%, unless it’s a SBC then
use SBC tax tables
 Individuals provisional tax calculation  detailed in par.21
 Companies provisional tax calculation  detailed in par.23

12. ESTIMATES!?!?
 Estimates of taxable income are made for both PMTS
 Estimates MUST include actual or anticipated taxable capital
gains
 For natural person, estimates MUST exclude:
 Retirement fund lump sum benefits
 Retirement fund lump sum withdrawal benefits &
 Severance benefits
 Amounts referred to in par(d) of gross income (certain benefits)
 1st PMT may not be less than the “basic amount”
 “Basic amount”  taxable income for the latest preceding
(before) year of assessment

13. Estimates of Provisional Tax
 Latest preceding year of assessment is (par 19(1)(e)):
 The year before the year in which the estimate is being
determined &
 A notice of assessment was issued 14 days or more before the
relevant provisional tax return is submitted
 If the “latest preceding year of assessment” ended more than 18
months before the submission of the relevant provisional tax return
then:
 Basic amount is increased by 8% per year
 Number of years counted from the latest preceding year of
assessment until the year in which the provisional tax PMT will
be made

14. LECTURE EXAMPLE
Lesego Construction (Pty) Ltd has a June year-end. At the time it had
to submit its first provisional tax return for its 2019 YOA, the taxable
income for its 2017 YOA, which was its latest preceding YOA at the
time, was R1 200 000. It received its 2017 assessment more than 14
days before its first provisional tax return for 2019 was due. The taxable
income for its 2017 YOA includes a R300 000 taxable capital gain.
1. Calculate the amount of Lesego’s first provisional payment if this
payment was based on the basic amount.
2. Calculate the amount of Lesego’s second provisional payment if this
payment was based on the estimate of
R1 100 000

16. Example
Tsela who is 28 years old, estimated her first provisional tax return for
her 2019 year of assessment on 31 August 2018 and paid an amount
of R25 000. Her income consists of her salary and income from her
part-time business.
Employees’ tax of R49 350 was withheld from her salary during the
2019 YOA. Tsela received her assessment for the 2018 YOA on 30
November 2018 which indicated her final assessed taxable income for
2018 as R450 000 and this included a taxable capital gain of R20 000.
She contributed R4 000 per month to a medical scheme and is the only
member.
Required: Calculate the amount of Tsela’s second provisional payment
if she decides to base this payment on the basic amt.

17. Penalties!!!-Underpayment penalty (par 27)
• Penalty of 10% is levied on late payment
of the 1st and 2nd provisional tax payment.
• If estimated taxable income is increased
and the additional tax is not paid within the
stated periods then 10% penalty will be
charged on the unpaid amount.

18. Penalty - Par 20 & 27
 Penalty applies to 2nd estimate submitted by the provisional
taxpayer
 If 2ND estimate not submitted  then the estimate will be
deemed to be Rnil
 To calculate the par 20 penalty we need to determine which
group the taxpayers falls into:
 If taxable income is R1 million or LESS for the year of
assessment OR
 If taxable income is MORE than R1 million for the year of
assessment
 Par 27: Late payment penalty  10%  applicable to the 1st
and 2nd PMTS

19. Penalty - Par 20 )
Taxable income is equal to R1 million or less
 Penalty applies if 2nd taxable income estimate is less than:
 The basic amount AND
 90% of the taxable income for the year of assessment (yoa)
 The penalty is 20% x (A – B)
 (A) is lesser of:
 Normal tax calculated on 90% of the taxable income for yoa
(after rebates) AND
 Normal tax on basic amount (after rebates)
 (B) is the provisional tax payment & employees tax paid by the end
of yoa

20. CLASS EXAMPLE
All information applies to the 2019 year of assessment.
Mr A (35 years old) is a registered provisional taxpayer. At the end of
the year of assessment Mr A submitted an estimate of R415 000 for
his second provisional tax payment. The following information applies
to Mr A:
1.Taxable income for the year of assessment is R480 000
2.Basic amount is R420 000
3.Employees tax deducted for the year is R48 000
4.Provisional tax paid is R15 000
5.6A medical aid credit correctly determined as R3 720
Required:
Calculate the par 20 penalty

21. Solution
20% x (A-B)
A is the lesser of:
90%x R480 000 = R432 000
Basic amount = R420 000
Therefore tax on R420 000:
Tax per tax tables 99 240
Primary rebate (14 067)
s6A medical credit (3 720)
Tax payable R81 453
B = R15 000 +R48 000 = R63 000
Penalty = 20%x(81 453 - 63 000) = R3 691

22. Penalty - Par 20
Taxable income is more than R1 million
 Penalty applies if 2nd estimate is less than:
 80% of the taxable income for the year of assessment (yoa)
 Then penalty is 20% x (C – D)
 (C) is the normal tax calculated on 80% of the taxable income for
yoa (after rebates)
 (D) is the provisional tax payment & employees tax paid by the end
of yoa

23. CLASS EXAMPLE
All information applies to the 2019 year of assessment.
Mrs Q (67 years old) is a registered provisional taxpayer. At the end of
the YOA Mrs Q submitted an estimate of R950 000 for her second
provisional tax payment. The following information applies to Mrs Q:
1.Taxable income for the year of assessment is R1 500 000
2.Basic amount is R1 050 000
3.Employees tax deducted for the year is R180 000
4.Provisional tax paid is R50 000
5.6A medical aid credit correctly determined as R7 440
Required:
Calculate the par 20 penalty

24. Solution
20% x (C-D)
C = 80%x R1 500 000 = R1 200 000
Tax per tax tables 409 041
Primary rebate (14 067)
Secondary rebate (7 713)
s6A medical credit (7 440)
Tax payable R379 821
D = R50 000 +R180 000 = R230 000
Penalty = 20%x(379 821 – 230 000) = R29 964

25. QUESITION TIME
“I always want to say to people who want to be rich and famous: 'try being rich
first'. See if that doesn't cover most of it. There's not much downside to being
rich, other than paying taxes and having your relatives ask you for money. But
when you become famous, you end up with a 24-hour job”
Bill Murray