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The Impact of COVID-19 on Provisional Tax Liabilities

In this series of informative notices related to the tax impact of the COVID-19 pandemic, our aim is to inform our clients as regards the tax relief at their disposal during this challenging time.

As we are entering provisional tax season, we must remember that there is some temporary relief pertaining to provisional tax payments provided by the South African Revenue Service (SARS).

Once again, the available provisional tax relief only applies to qualifying employers. A qualifying employer is an employer who:

  • Is an individual, trust, company, partnership, close corporation, share-block or co-operative who operates a trade; and
  • Has a gross income of R100 million or less or is a qualifying micro-business as set out in the Sixth Schedule of the Income Tax Act; and

(Gross Income must not include income totaling more than 20% consisting of interest, dividends, rental income from the letting of fixed property (unless this is the entity’s main trade and makes up at least 90% of gross income), and royalties)

  • Is fully tax compliant.

The provisional tax deferral allows taxpayers to only pay the following amounts for the relevant provisional tax return submitted between the below-mentioned periods:

  1. Only 15% of the total estimated tax liability payable on the first provisional tax submission if the submission due date is between 01 April and 30 September 2020.
  2. Only 65% of the total estimated tax liability payable on the second provisional tax submission if the submission due date is between 01 April 2020 and 31 March 2021.
  3. The final 35% total estimated tax payable is payable as a third provisional installment six months after year end.

There will be no SARS interest and penalties on the deferred amount.

Qualifying taxpayers must declare 100% of the total estimated tax liability on the provisional tax returns, but only need to pay the percentage as indicated above for the relevant return.

For any assistance in this regard, please do not hesitate to contact us at Tax@rain.org.za.