Can SARS penalise you for making a third (i.e. top-up) provisional tax payment?
11 February 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: For the 2014 tax year a client of mine had a profit of R2 000
176. The income tax according to the small business corporation (SBC) rates was
R465 751. On the first provisional tax return for 2014 I submitted a nil return
because I was still doing 2013 financial statements and could thus not estimate
the appropriate taxable income as since I had no correct information at my
hands at the time. Furthermore, I was also late so I thought to avoid penalties
I must just submit a nil return.
On the second provisional tax return for 2014 again it looked
like I was late but I wasn't aware of that and submitted the return and paid
R325 000. As a result, I was hit with penalties and interests of R50 000 and
the client decided to pay it because at the time he was rushing for a tax
Now, on 25/01/2015, before I submitted the 2014 ITR14 I did my
calculations again and figured I must make a third provisional tax payment of
R100 000. According to my calculations, the total tax due will be R465 751.51.
So far I have paid R375 000 (including penalties and interest) + R100 000 (that
I am about to pay as a third provisional tax payment) = R475000.
I did so and paid thinking that I got it right and I also
thought that the assessment would come back reflecting a refund of R9 249.
Unfortunately I was hit with additional tax again for that R100 000 additional
payment. As far as I understand, a third provisional tax payment is optional.
How then can I be penalised for that? Please explain that to me.
The assessment for 2014 income tax return has just been assessed
and it shows that normal tax is R465 751 as I anticipated. Additionally, my
client has been penalised R70 748.28 for the underestimation of taxable income.
There was another penalty of R7 995.06 for the nil (and late) submission of the
first 2014 provisional tax return.
I want to write a letter the Commissioner and ask for the R70
748.28 and R7995.06 penalties to be waived and explain to them that the
under-estimation did not occur due to my negligence.
A: Paragraph 20 of the Fourth Sch ITA will impose a 20% penalty of
the difference between 80% of the normal tax on actual taxable income and the
amount of actual tax paid by the end of the year of assessment. If you
submitted a Rnil 1st provisional return and paid your second late,
the penalty will be 20% of 80% of the tax on actual taxable income. Therefore
20% x (80% x R465 000)= +- R74 000 penalty. Note that the law was
amended from 20 Dec 2012 (Tax Administration Laws Amendment Act 2012) to base
the second part of the test on the amount paid during the year of assessment
whereas previously it was based on the amount estimated. Therefore
though your estimate was not that wrong, the fact that you paid late resulted
in the second provisional tax payment being disregarded in determining the
underestimation penalty. In respect of the 1st provisional payment
no penalty applies, SARS can merely reject the estimate and substitute it for
an estimate of its own if the taxpayer cannot justify it.
The third "top up” payment is voluntary as noted, but only
impacts on interest payable to SARS, it does not have an impact on the paragraph
20 underestimation penalty.
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advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
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