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How will SARS levy interest and penalties in respect of the under-payment of provisional tax?

02 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

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.

As 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.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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