Provisional tax for owner‑managed companies in South Africa

It is a payment method

SARS does not want the full company tax bill on the day the return is assessed. Provisional tax splits it. You estimate taxable income, apply the rate that fits (ordinary company tax, or small business corporation rates if you qualify), and pay. The assessment later squares the difference.

Individuals who earn business, rental or other non-remuneration income are often provisional taxpayers too, with exemptions when that income is small. This note is about the company and its owner together, because in a family business the two estimates affect each other.

The dates that catch February year-ends

Most small companies use a February year-end. For the year of assessment from 1 March 2026 to 28 February 2027:

• First period: 31 August 2026. Typically half of the tax on the estimated full-year income.
• Second period: 26 February 2027. 28 February 2027 is a Sunday, so the last business day is the Friday. This payment brings the estimate up to date.
• A voluntary third payment, after year-end, can limit interest if the first two were light. For a February year-end the relevant date is in the September after year-end. Do not mix it up with the third payment of the previous year.

If your year-end is not February

The two compulsory payments sit six months into the year and on the year-end, with the same logic and different calendar dates. A June year-end does not get to use 31 August as a universal South African holiday. Put the dates from your own assessment on the compliance calendar and ignore generic posters.

How the estimate should be built

Start with year-to-date profit from a closed set of books, not from the bank balance. Add a sober view of the months left: seasonality matters, and a December retail month is not an August month. Remove expenses that are not deductible and income that is not taxable. Then look at what the owner will take as salary before year-end, because salary is deductible in the company and taxable in the person’s hands.

SARS can charge an underestimation penalty if the second estimate is too low. A figure often quoted is 20% where the estimate is below 80% of the final taxable income, and there is a separate penalty for paying late. There are exceptions, including where the estimate is based properly on the basic amount. Do not self-assess the penalty from this paragraph. We compare the estimate with last year’s assessment and this year’s books before the second payment is released.

What to send your accountant in July and in January

July: books closed to June, plus anything you know about the second half (a contract won, a vehicle, a bad debt). January: books closed to December, stock if it moves the profit, and a decision on bonuses and the owner’s salary. Arriving on 25 February with a shoebox is how estimates become guesses.