Q: My client
understands that he has to declare the correct provisional tax for the upcoming
period but does not have the cash flow to pay it. What penalties and interest
will be calculated for provisional tax and is there a 'pay off' period allowed?
A: A late payment penalty of 10%
is imposed on late payment of provisional tax. Furthermore, since December 2012,
the amount paid late is excluded for determination of the understatement
penalty in para 20 Fourth Schedule of the Income Tax Act (ITA) i.e. you will pay
a higher underestimation penalty as it is not just on underestimate amount but
on the amount actually paid during the year of assessment.
to remedies, section 167 of the Tax Administration Act (TAA) allows SARS to
enter into a payment deferral agreement with a taxpayer subject to the
conditions in section 167 & section 168 of the TAA being met. It is unclear
whether the deferred amount would still be subject to late payment
/underestimation penalty as the relevant provisions in the TAA and Fourth Schedule
of the ITA don’t seem to prescribe what happens in this case or provide the
SARS with discretion to determine otherwise for these payment purposes.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
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
primary resources when taking a decision.
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