A taxpayer completed his first provisional tax return with the correct taxable income figure. The e-filing form then calculated the tax liability for the 1st period to be 50% of the total taxable income figure. However, as per the COVID-19 provisional tax relief for the 1st period, only 15% should apply. There is no option on the form to apply for the relief or indicate that he is taking up the relief. The taxpayer poses the following questions: 1. Does he complete the return with a lower taxable income to equal the 15% total tax payable? If he does, will he be penalised for underestimation of income? 2. Is there another way for him to apply for the relief? 3. Does he submit the return as per normal and then pay only the 15% in terms of the COVID-19 relief? Will he automatically be penalised by the system for underpayment of provisional tax? 4. How does he submit the return correctly?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
You must, in the first instance, confirm if the taxpayer qualifies for the relief. In the Disaster Management Tax Relief Administration Act, 2020 (still a Bill), unless the context indicates otherwise … the following terms have the following meaning:
‘‘qualifying taxpayer’’ is a company, trust, partnership or individual—
(a) that is a taxpayer as defined in section 151 of the Tax Administration Act;
(b) that conducts a trade during the year of assessment ending on or after 1 April 2020 but before 1 April 2021 and has a gross income of R100 million or less during that year of assessment;
(c) whose gross income for that year of assessment does not include more than 20 per cent in aggregate of interest, dividends, foreign dividends, royalties, rental from letting fixed property, annuities and any remuneration received from an employer; and
(d) that is tax compliant as referred to in section 256(3) of the Tax Administration Act when making a reduced payment under this Act: If the above applies, under section 3(1) of this Act, a qualifying taxpayer that is a provisional taxpayer may—
(a) during the period commencing on 1 April 2020 and ending on 30 September 2020, in respect of provisional tax payable in terms of paragraph 21(1)(a) or 23(a) of the Fourth Schedule to the Income Tax Act during the period, pay 15 per cent instead of one half of an amount equal to the total estimated liability (as determined in accordance with paragraph 17 of the Fourth Schedule) for normal tax in respect of the relevant year of assessment less the total amount of—
(i) any employees’ tax deducted by the taxpayer’s employer during the year up to the date the provisional tax is due and payable; and
(ii) any tax proved to be payable to the government of any other country which will qualify as a rebate under section 6quat of the Income Tax Act; …
This is quite clear, but paragraph 2.3.3.2 of the Memorandum explains it as follows: “The first provisional tax payment due from 1 April 2020 to 30 September 2020 will be based on 15% of the estimated total tax liability …”
The full amount is declared on the IRP6 and the SARS system will apply the relief – you will see that on the statement of account. In principle that taxpayer makes the estimate of taxable income for the year and captures that on the return (the IRP6). The SARS system will calculate the tax payable if an individual, or the tax is calculated and entered. The taxpayer then enters employees’ tax and foreign tax credits (and the first payment if this is a final estimate). The IRP6 is then submitted and the SARS system will calculate the relief (the 35%). That is why we referred you to the statement of account. Before payment is made you must request a statement of account to see that SARS gave the relief before payment is made.