Underestimation.
On late pay.
Non-negotiable.
Optional 3rd.
Critical Problems We Solve
Effective financial management isn't just about balancing books; it's about removing the friction points that stall your business growth.
Cash flow shock of a single massive tax bill
Automatic 10% penalties for late payment
20% penalties for under-estimating income
Compliance blocks on Tax Clearance Certificates
The Two-Payment System
The South African tax system requires you to pay your tax as you earn it. Provisional tax splits your liability into two payments: Content: 1. **August:** You pay 50% of your estimated tax for the year. 2. **February:** You pay the remaining balance to reach 100% of your estimated tax.
Failing to make these payments doesn't just attract interest; it attracts a flat 10% penalty on the late amount.
- 50% due by end of August
- Balance due by end of February
- Cash flow smoothing
- Interest avoidance
The 'Basic Amount' Trap
To simplify things, SARS pre-populates your return with a 'Basic Amount' (your taxable income from your last assessed year). You are allowed to use this amount without risk of penalties, *provided* that assessment is not older than 18 years.
We carefully check if your Basic Amount is valid. If it has expired, using it will trigger an audit and penalties. We recalculate your actual position to be safe.
- Safe harbour usage
- 18-month validity check
- 8% annual escalation
- Audit prevention
The Voluntary Details (Top-Up)
For companies with complex finances, it's hard to be 100% accurate in February. If, after your year-end audit (usually around September), you realize you underpaid, you can make a voluntary 'Third Payment'.
This payment stops the interest clock running. We advise on whether a top-up is necessary to maximize your cash retention while minimizing SARS interest.
- September top-up
- Interest saving
- Final liability settlement
- Strategic cash flow management
Estimating Income from Real Records
A provisional tax estimate is only as reliable as the numbers behind it. For companies, we review year-to-date management accounts, taxable income adjustments, director remuneration, VAT trends, payroll costs, and any once-off income or expenses before calculating the IRP6 position. For individuals, we review rental income, freelance income, investment income, medical credits, retirement annuity deductions, and PAYE already withheld.
The aim is to avoid two common outcomes: paying too little and triggering penalties, or paying too much and straining cash flow until the annual assessment is finalised. We also check whether the basic amount is still valid and whether SARS has already issued an assessment that changes the safe estimate.
This approach gives the taxpayer a defensible estimate and a clearer payment instruction before the August and February deadlines. It also keeps provisional tax connected to [business income tax](/services/tax/business-income-tax-returns), [personal income tax](/services/tax/personal-income-tax-returns), [monthly accounting](/services/accounting/monthly-accounting-services), and [tax clearance](/services/tax/tax-clearance-certificates), because missed IRP6 submissions often affect the taxpayer's wider SARS compliance status.
For companies with uneven income, we also compare the estimate to VAT turnover, payroll costs, debtor collections, and management accounts so a busy sales period does not create a surprise tax shortfall later.
- Management accounts reviewed
- PAYE and prior payments deducted
- Basic amount validity checked
- Cash flow impact considered
Who Is This For?
- All registered companies (Pty Ltd)
- Directors of companies
- Freelancers and Sole Proprietors
- Individuals with rental or investment income > R30,000
Engagement Requirements
- Year-to-date Management Accounts (for August)
- Estimated full-year income (for February)
- Details of PAYE paid
- Certificates for Medical Aid/RA (for individuals)
Deliverables & Results
- Calculation of First Period Provisional Tax (August)
- Calculation of Second Period Provisional Tax (February)
- Submission of IRP6 returns via eFiling
- Generation of Payment Reference Numbers (PRN)
- Calculation of optional Third Top-up Payment (September)
South African Compliance Context
"Creations transformed how we handle SARS. No more compliance anxiety."
Trusted Resources
Our Operational Methodology
A structured, 5-step approach designed for precision and clarity.
We estimate your total annual taxable income based on your year-to-date performance.
We calculate the tax due, deducting PAYE already paid and previous provisional payments.
We submit the IRP6 return to SARS before the deadline.
We send you the payment instruction so you can pay SARS directly.
Professional Insights
The Second Period (February) is the most critical. You must be at least 80% accurate in your estimation to avoid penalties.
Many businesses treat the August payment lightly, paying 'Zero'. This strains cash flow in February when the full year's tax becomes due at once.
Provisional tax payments are prepayments. If you overpay, you get the money back (with interest) when you file your final annual return.
For owner-managed companies, provisional tax should be reviewed beside director salaries, dividends, VAT turnover, and year-end profit expectations. Looking at IRP6 in isolation often misses the real cash flow pressure.
Where income is seasonal, the estimate should reflect contracts already signed, debtor collections, stock purchases, and expected year-end adjustments rather than simply copying last year's taxable income.
Related Insights and Resources
Use these links to move from service scope into practical guidance, supporting documents, and regional pages.
Practical guidance on how to Submit Your Tax Return on eFiling Without Rework.
Practical guidance on tax Clearance Certificate What Usually Delays Approval.
Practical guidance on what to Do If You Miss a SARS Tax Deadline.
Practical guidance on why Small Businesses Fall Behind on Provisional Tax.
Practical guidance on online Tax Services vs Local Advisers.
Practical guidance on what SARS Penalties Usually Point To in a Small Business.
Common Questions
Everything you need to know about our provisional tax (individuals & companies) service.
Is Provisional Tax a separate tax?
No. It is just a way of paying your normal Income Tax in two installments (August and February) instead of one lump sum at year-end.
What happens if I underestimate my income?
If your estimate is more than 10-20% lower than your actual final income, SARS imposes a 20% 'Underestimation Penalty' on the difference.
I own a dormant company. Must I file?
Yes. All registered companies must file IRP6 returns, even if they are 'Nil' returns, to maintain compliance.
Can I use the 'Basic Amount' from last year?
You can, but SARS increases it by 8% per year. Also, if your last assessment is older than 18 months, the Basic Amount expires.
Do companies always submit provisional tax?
Yes. Registered companies are provisional taxpayers and must submit IRP6 returns, even where the estimate is nil for a dormant period.
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See how we've transformed the financial frameworks of companies just like yours.
