Should my company make a third provisional-tax payment?

Direct answer

Consider it when the first two provisional payments are below the company's final expected tax. The third payment is voluntary, but paying the shortfall by the applicable date can reduce or avoid interest that would otherwise run until settlement.

For a company with a February year-end, the top-up is generally due by the end of September. For another year-end, it is generally due within six months after year-end. Confirm the exact business-day rule and payment reference before paying.

What this means in practice

Prepare a near-final tax calculation rather than simply paying the accounting profit multiplied by the company rate. Taxable income can differ because of capital allowances, assessed losses, non-deductible expenses, recoupments and timing adjustments.

The top-up does not cure an unreasonable second provisional estimate or automatically remove an underestimation penalty. It mainly addresses interest exposure.

Step-by-step

1. Finalise management accounts soon after year-end.
2. Calculate estimated taxable income and normal tax.
3. Subtract the first and second provisional payments and other valid credits.
4. Quantify the remaining balance and interest risk.
5. Pay by the top-up deadline using the correct SARS reference.
6. Reconcile the payment to the ITR14 and assessment.

Documents and records to keep

• Final management accounts and tax computation.
• IRP6 returns and payment confirmations.
• Assessed-loss and capital-allowance schedules.
• SARS statement of account.
• ITR14 and assessment.

Important limits and exceptions

Refunds, disputed assessments and unusual year-ends can change the calculation. A payment allocated to the wrong period may not stop interest.

When to get tailored advice

Get help for a large shortfall, assessed losses, restructuring, a changed year-end or uncertain payment allocation.

Related TaxProof guides

• How are company assessed losses used after a loss year?
• How do I request remission of SARS interest?

Sources

• SARS, Guide to Provisional Tax