The South African Revenue Service (SARS) has announced that rules governing provisional tax payments have been relaxed to ease the administrative and financial burden on taxpayers.
Earlier this year Parliament approved an important change to the second provisional tax payments process and the imposition of additional tax on underestimates relating to these payments.
Until now, additional tax has been imposed if the estimate for the second period is not equal to at least 90% of the taxable income for the year or the basic amount (essentially the taxable income for the last year assessed).
The Revenue Laws Second Amendment Bill (2008), approved by Parliament and due for promulgation in January 2009, provides that additional tax will be imposed if the estimate is not equal to at least 80% of the final taxable income for the year.
An existing provision that SARS may waive the additional tax if the estimate is "seriously calculated and is not deliberately or negligently understated" has been retained.
According to SARS, the amendment, which followed the usual Parliamentary consultation process, was aimed at creating more certainty and accuracy in provisional tax payments to the benefit of both taxpayers and the tax collector.
More accurate estimates by taxpayers will reduce the number of times that taxpayers have to respond to SARS’s enquiries in this regard, the service stated.
Taxpayers have long had the option of using actual taxable income for the current year as a basis for estimating the second provisional payment. This option was typically used when taxpayers expected a lower taxable income than the basic amount. These taxpayers were generally able to make estimates to within the required 90% of actual taxable income. "Taxpayers facing difficult circumstances in the current trading environment thus have more leeway for error than they would have up to now," SARS stated.
SARS has decided to implement a transitional arrangement for second provisional tax payments due on or before February 28, 2009. In terms of this transitional arrangement, SARS will waive the additional tax imposed under the new legislation where provisional tax payments are based on estimates that are equal to at least 90% of the taxable income for the year or the basic amount.
SARS explained that the IRP6 provisional tax returns due for submission by February 28, 2009 are currently being printed for distribution to taxpayers. These forms are identical to previous forms except that, in line with the new legislation, they no longer contain a SARS-proposed calculation.
The new provisions will apply in full effect from March 1, 2009.
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