Provisional tax is not a separate tax. It is a system of paying income tax in advance through estimated taxable income. The first IRP6 is generally due within six months after the start of the year of assessment, the second by the end of the year, and a voluntary top-up may be made later within the applicable rules.

Who is a provisional taxpayer

Companies are generally provisional taxpayers, while individuals may fall into the system when they earn income other than remuneration subject to PAYE, subject to exclusions and thresholds.

For the current official requirements, refer to SARS’s provisional-tax guidance and SARS’s provisional-tax guide.

Registration status should be confirmed on SARS rather than assumed from the taxpayer’s occupation or entity type.

First provisional period

The first estimate covers the full year even though only part of the year has passed. For a February year-end, the deadline is normally at the end of August or the preceding business day where the date falls on a non-business day.

Use actual year-to-date results, an updated forecast and known once-off transactions. Simply copying the previous year can understate a growing business or overstate a declining one.

Second provisional period

The second estimate is due by the end of the year of assessment and should be based on information close to the final result. At this point, unreconciled bookkeeping becomes expensive because the taxpayer may not know the likely taxable income.

The payment takes account of tax calculated on the estimate, less prior provisional payments and applicable credits.

The optional third or top-up payment

A top-up payment may reduce interest exposure where the second payment was insufficient. It does not necessarily remove penalties arising from an inadequate estimate.

The timing differs according to the taxpayer’s year-end and should be confirmed before payment.

Why nil returns still matter

SARS’s updated provisional-tax guide states that a provisional taxpayer is required to request and submit first and second IRP6 returns even where the calculated payment is nil.

A dormant company should therefore not ignore the return merely because it had no taxable income.

Information needed for a reliable estimate

• Management accounts or income and expense records
• Year-to-date payroll and directors’ remuneration
• Asset purchases and disposals
• Finance costs and non-deductible expenses
• Assessed losses and prior assessments
• Tax credits and PAYE already deducted
• Forecast sales, gross profit and overheads
• Any distributions or unusual transactions

Common provisional-tax mistakes

• Estimating turnover instead of taxable income
• Using incomplete bank data without accruals or creditors
• Ignoring non-deductible expenses
• Missing the submission because no payment is expected
• Paying with the wrong reference
• Underestimating the second period without support
• Assuming the final ITR14 will automatically fix all penalties

Example: fast growth after the first estimate

A company submits its first IRP6 using the prior year’s profit, but wins a large contract in September. By the second period, the forecast must be updated for the higher revenue, direct costs, payroll and tax adjustments. Ignoring the change because the first return was already filed can produce an inadequate second estimate and cash-flow shock.

Build provisional tax into cash flow

Estimate tax monthly and transfer a provision to a separate account where practical. This reduces the temptation to use tax cash for operating expenses and makes the August or year-end payment less disruptive.

Related LMW guidance covers VAT registration, ITR14 company income-tax returns, and recurring SARS administrative penalties.

How LMW Financial Solutions can assist

LMW can review the taxpayer’s current information, prepare the IRP6 calculation, submit the return and identify bookkeeping gaps before the deadline. Better estimates begin with better records, so provisional tax should be linked to regular management reporting.

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Frequently Asked Questions

Is provisional tax an extra tax?

No. It is an advance-payment system for income tax, and the payments are credited on assessment.

When is the first IRP6 due?

Generally within six months after the start of the year of assessment.

Must I submit an IRP6 if the payment is zero?

SARS guidance states that first and second provisional returns must still be submitted where the taxpayer is provisional, even if the result is nil.

Can provisional tax be based on turnover?

No. The estimate is based on taxable income, which requires consideration of deductible and non-deductible items.