Clarify, when is an individual a provisional taxpayer?
Important:
This answer is based on tax law for the tax year ending 28 February 2019.
Answer:
Whilst we don’t know what exactly the SARS call centre person said, it certainly is not true that “everyone is a provisional taxpayer”. With effect 1 March 2017, a "provisional taxpayer" means any person (other than a company) who derives income by way of —
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any remuneration from an employer that is not registered in terms of paragraph 15;
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any amount which does not constitute remuneration; or
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an allowance or advance contemplated in section 8(1). See the definition in paragraph 1 of the Fourth Schedule.
It excludes any natural person who does not derive any income from the carrying on of any business, if:
(AA) the taxable income of that person for the relevant year of assessment does not exceed the tax threshold; or
(BB) the taxable income of that person for the relevant year of assessment which is derived from interest, dividends, foreign dividends and rental from the letting of fixed property does not exceed R30 000.
The amendment to the definition of provisional taxpayer was meant to apply where the employer cannot register as an employer (in the RSA) because the employer is not a resident of the RSA. The wording of the Act however, would now also require of an employee, working for an employer that failed to register, to submit provisional tax returns.
Unfortunately, the Act requires of provisional taxpayers to make provisional tax payments (and file the required returns). The onus is therefore on the individual to determine when the person becomes a provisional taxpayer and to request the relevant returns (the IRP6’s).
Where the person failed to do so, it is deemed that the person has submitted an estimate of an amount of nil taxable income. This applies to the final or second provisional tax period and will then result in penalties (a maximum of 20% as the late payment penalty will then be included in the underestimation penalty).
The remedy (or ground of objection) when the person failed to submit the return because “the individual was not aware” that is was required, is found in paragraph 20(2C) of the Fourth Schedule - the failure was not due to an intent to evade or postpone the payment of provisional tax or nirmal tax.