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Who are provisional taxpayers? · Tax Break: South African tax for professionals

• 0:11
  Welcome and thank you for joining me for Tax Break.
• 0:13
  This is a podcast about South African Tax 4 South African tax
• 0:16
  professionals and practitioners. My name is Peter Venezuelan, and
• 0:21
  in each episode I'll discuss the topical recent development in
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  South African decks. I tried to keep the episode
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  short enough that you can listen to them whenever you've got a
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  few minutes to spare in your day.
• 0:32
  Now I was hoping at this point in time that we would have draft
• 0:35
  bills out for comment and that we could have an episode or two
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  on what the proposals in those bills are.
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  But unfortunately at the point when I'm recording this, these
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  bills were not yet published. So I would, I would expect the
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  the delay to probably be as a result of the the developments
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  relating to the VAT write in the budget process.
• 1:03
  So our topic for today, we're going back to some basics, but I
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  think basics that are quite relevant at this point in time.
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  We're looking at the question who are provisional taxpayers?
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  So let's start by asking why is it relevant?
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  Now if you look at the notice that such issued under Section
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  66 of the Income Tax Act in May, that notice deals with a few
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  things, but it amongst others it deals with when certain
• 1:37
  taxpayers need to submit their tax returns.
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  If we're looking at an individual, if that individual
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  is not a provisional tax payer, they need to submit a tax return
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  by the 20th of October 2025. But if the individual is a
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  provisional tax payer, they only need to submit their return by
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  the 19th of January 2026. So whether an individual is a
• 2:00
  provisional tax payer or not affects when they need to submit
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  their return. That then brings us to the
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  question, how do you know whether someone is a provisional
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  tax payer or not? The answer to that we find in
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  the 4th schedule to the of the Income Tax Act.
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  So that schedule deals with the different mechanisms to to pay
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  income tax. On the one side that deals with
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  employees tax then the other side it deals with provisional
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  tax. So in paragraph one, we find the
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  definition of a provisional tax payer.
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  Then now if we analyse that definition a bit, it's got 2
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  components, it's got the positive listings.
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  So in other words, to define who are provisional taxpayers.
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  And then there are also some exclusions to say.
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  But even if you meet the positive side, you, you fall
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  into this definition, you may still be excluded by the
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  exclusions at the end of the provision.
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  So let's first start by looking at is a provisional tax payer.
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  So the provision has got 3 paragraphs that that that define
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  who would be a provisional tax payer.
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  And if we look at paragraph A, you can actually identify three
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  different types of persons they they that could fall under
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  paragraph A. The first one is a person that's
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  not a company, so typically an individual who receives
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  remuneration from an employer who is not registered as an
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  employer with Sasha. In other words, they didn't
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  withhold employees tax and and that leaves the employee in a
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  place where they need to then pay their tax through
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  provisional tax. The second one, also covered by
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  paragraph, is a person, not a company that would derives
• 3:49
  income that is not remuneration. So.
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  So only your tax on remuneration is collected through employees
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  tax and any other taxes. If you get another form of
• 3:59
  income, then the tax would be collected through provisional
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  tax. And the last one is a person
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  that is not a company U derives income that is remuneration.
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  So in other words, that is subject to the employee's tax,
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  but that consists of certain allowances.
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  So advances that that's dealt with under Section 8 one.
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  So this would typically be travel allowances, subsistence
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  allowances, you allowances to public office holders.
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  So those allowances would be subject to based you in, but
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  only to an extent. So it might be that there's
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  further tax payable when you then have to do the actual
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  calculation to see how much tax is payable in terms of these
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  allowances. So pay provisional tax would
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  then be the mechanism through which you need to to make that
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  additional tax payment. Then paragraph B of the
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  definition includes a company. So in the context of what we're
• 5:01
  talking about now with the question at least came from
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  remember that the company as its own dates when it need to submit
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  the the, its tax return. So that's 12 months after its
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  financial year or its year of assessment.
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  So it's not affected by the the 20 October or the the 19 January
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  dates. And then lastly, this provision
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  dealing with certain labour brokers and that I'm not going
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  to go into that into that much detail today.
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  I think labour brokers is, is a topic for a different day.
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  If we then look at the exclusions, there are quite a
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  few exclusions that are not that relevant to individuals.
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  These exclusions for example for Pbos, recreational clubs, body
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  corporates, small business funding entities, deceased
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  estates, certain professional bodies.
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  So those things are those entities are not provisional
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  taxpayers, but it it doesn't really an individual wouldn't
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  really fall into those categories.
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  There's also another specific exclusion for non resident
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  owners or charterers of ships and aircrafts.
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  They are taxed under a special regime under Section 33.
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  So they are also excluded. But I think that's a very it's a
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  it's, it's not something that is a common category of tax payer
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  that's included. So if we look at the the the the
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  the natural person exclusions that you are most likely to
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  encounter, then that's probably the ones that you find in
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  paragraph D of the exclusions sub paragraph B.
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  So that paragraph says that a natural person who does not
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  derive income from business good possibly still be excluded from
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  from having to submit or being provisional tax payer.
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  So whether person derives income from business or not, that's a
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  question of fact. Do you, you need to look at
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  where did this person's income come from?
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  So if a person does not get their income from business, they
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  these two circumstances or two scenarios where they could
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  possibly be excluded from being a provisional tax payer even
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  though they fall under paragraph A that we spoke about earlier.
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  The first one is if the person is income is such that they
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  would it would be under the tax threshold.
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  So in other words, if you apply the the tax rates and the
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  rebates, there would be no tax payable on their taxable income
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  or secondly the taxable income of that person for the year of
• 7:47
  assessment draft from interest, dividends, foreign dividends,
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  rental from rating, fixed property and any remuneration
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  from an employer that is not registered as an employer does
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  not exceed 30,000 Rand for the for the year.
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  Then that that natural person would also be excluded from
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  being a provisional tax payer. Now remember when we talk about
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  income in this case, we talking income in the context of the
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  legislation or the income tax like means it's your gross
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  income less the exemptions. So it might be that if we look
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  at for example, interest for a natural person, interest would
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  be included in gross income. But as soon as we start looking
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  at income or taxable income, a portion of that interest would
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  on an annual basis be excluded or be exempt.
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  So if it's exempt, then we are not looking at at income.
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  So that is something to be in mind when you when you look at
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  this, at this exclusion, right. So hopefully I've given you a
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  bit of a recap as to who our provisional taxpayers.
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  Of course, if a person is a provisional tax payer, there's a
• 9:01
  lot more to it than just when you need to submit your returns.
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  That person needs to submit an IRP 6 and make provisional tax
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  payments on the dates specified in the 4th schedule.
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  So that's normally in the middle of your of your year of
• 9:18
  assessment and at the end and if the person doesn't make those
• 9:22
  payments, then these these exposure to certain payments for
• 9:29
  penalties, for late payment, there's underestimation
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  penalties to consider. So there are quite a few other
• 9:35
  consequences to think about when it comes to provisional tax
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  bias. I think also the probably add to
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  this, if you are looking at a provisional tax payer and you
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  need to start completing your IRP 6.
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  There's a all those of other issues that also come up that we
• 9:52
  may consider in future episodes. For example, how do you need to
• 9:56
  do your estimates? What are the minimum estimates
• 9:59
  that you may use? Those kind of things, right?
• 10:02
  So in summary, whether a natural person is a provisional tax
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  payer or not depends on the type of income that they receive,
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  whether that's remuneration or not.
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  And if it is remuneration, it you may still be a provisional
• 10:17
  tax payer depending on who the person is receiving it and what
• 10:22
  type of income you are receiving.
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  The other implications of being a provisional tax payer it
• 10:27
  affects when you need to submit your returns.
• 10:30
  It requires that you submit IRP sixes and you may be exposed to
• 10:34
  certain penalties if you fail to comply with the provisional tax
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  requirements. That's it for today's episode.
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  If you've got any questions, comments, please let me know on
• 10:44
  e-mail. My e-mail address is in the show
• 10:46
  notes. If you like the podcast, please
• 10:49
  go and subscribe on your favorite podcast platform and
• 10:52
  tell all your friends and colleagues about the podcast.
• 10:55
  As always, just perhaps a reminder that this podcast was
• 10:59
  not intended to be tax advice. It's for awareness purposes
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  only. Until next time, goodbye.