Provisional tax returns – to submit or not to submit?

Provisional tax returns – to submit or not to submit?

There seems to be quite a bit of confusion around provisional tax this year and more importantly who is liable to submit a return. SARS have adopted a new approach and are not automatically sending out returns any more and are rather leaving it up to tax payers to request the forms from SARS.

In spite of this we have still received almost 70 emails notifying tax payers that they are liable to submit a provisional tax return – and the letters are confusing too becuase they make reference to the fact that according to SARS, the tax payer is a provisional tax payer and thus liable to submit a return. Although, it also says “You do not need to submit an IRP6 return if you are no longer liable for Provisional Tax. However, you may be charged interest and/or a penalty for non-submission of your IRP6 return if at the time of assessment it is determined that you were liable as a provisional taxpayer”. Little wonder that there is such confusion!

So what do the rules say – just who is a provisional tax payer?

With reference to the definition of a provisional taxpayer in Paragraph 1 of the Fourth Schedule of the Income Tax Act No.58 of 1962, a provisional taxpayer is:
• Any person (other than a company) who derives income, other than remuneration or an allowance or advance as contemplated in section 8(1).
• Any company excluding public benefit organisations and recreational clubs.
• Any person who is notified by the Commissioner that he is a provisional taxpayer (this is an important clause).

The rules then go on to say the following:

The following persons / natural persons are not required to pay provisional tax:

Individuals below the age of 65 who do not carry on a business and whose taxable income:

  • will not exceed the tax threshold for the tax year; or
  • from interest, dividends and rental will be R20 000 or less for the tax year.

Individuals age 65 and older if their annual taxable income:

  • consists exclusively of remuneration, interest, dividends or rent from the lease of fixed property; and
  • is R120 000 or less for the tax year.

So that’s what the rules say…but then there is that sneaky clause that says that “any person who is notified by the Commissioner that he is a provisional taxpayer” is liable to submit a return. So does the letter mentioned above constitute “being notified” or not?

So my advice is that if you think you might be liable, or you were in the past but now could be exempt in terms of the above rules, then phone the call centre 0860 121218 and ask SARS. Just make sure that you get the name of the call centre agent, the time and date of the call and most importantly, make sure you get a reference/case number for the call. And if you are still not sure, then err on the safe side and submit a nil return (it is a really simple and relatively quick process).

If you need to submit a return, you have 26 days to go…