Provisional tax payments in the statements
How a South African company's provisional tax payments offset its current tax charge at year end, when the net is a liability or asset, and the proof.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa
The trial balance has an account called "SARS – provisional tax" with two debits in it. Somewhere else there is a tax expense the junior has just calculated. Nobody has decided what the balance sheet should show, and the draft has the provisional payments sitting in current assets while the full tax charge sits in current liabilities.
That presentation overstates both sides. A South African company's provisional payments are payments on account of the same tax the charge measures, and they belong together. This article explains how the payment cycle works, how the net figure is presented, and how to prove it to SARS's records.
Companies are in the system automatically
SARS says any person who receives income other than remuneration is a provisional taxpayer, and that companies automatically fall into the provisional tax system without a separate registration. Every trading company client is therefore paying tax on account during the year, whether or not anyone at the client thinks of it that way.
The payment cycle against the year's charge
SARS sets out the dates:
- First payment: within six months of the start of the year of assessment. For a company with a March start, that is 31 August.
- Second payment: by the last business day of the year of assessment. For a February year-end, that is the last business day of February.
- Third payment: voluntary. SARS says it is due by the last business day of September for individuals and February year-end companies, or within six months after year-end in any other case.
If a date is not a business day, SARS says payment is due on the last business day before it.
The timing matters for the statements. The first two payments fall within the financial year, so they are in the trial balance at year end. The third, if the company makes it, falls after year end, so it is not. On the reporting date, the company has paid two instalments towards a charge that is now known more precisely than when either was estimated.
Liability or asset
Under IAS 12, current tax for current and prior periods is recognised as a liability to the extent that it is unpaid, and an overpayment of current tax is recognised as an asset. IAS 12 also says current tax liabilities and assets are measured at the amount expected to be paid to, or recovered from, the taxation authorities, using the tax rates and laws enacted or substantively enacted by the end of the reporting period.
For the company rate, SARS says the income tax rate for companies is 27% for years of assessment ending from 1 April 2026 to 31 March 2027, unchanged from the year before. Confirm the rate on SARS's page for the year you are closing, and see the tax note and the company rate and current tax at enacted rates for the measurement detail.
A worked example in words: the company's current tax charge for the year is calculated from taxable income at the enacted rate. From it, deduct the first and second provisional payments made during the year. If the charge is bigger, the difference is a current tax payable; the company may settle it with the voluntary third payment or on assessment. If the payments were bigger, the difference is a current tax receivable. One line on the balance sheet, not two.
Agreeing the tax account to SARS
The trial balance tells you what the client says it paid. SARS's statement of account for the income tax number tells you what SARS received and how it allocated it. Before the draft goes to review:
- Obtain the SARS statement of account covering the year.
- Match each provisional payment in the ledger to SARS's record, by date and amount.
- Look for payments SARS allocated to a different period or tax type.
- Bring in any assessment for the prior year and the payment or refund that followed it.
- Note interest or penalties separately; they are not part of the current tax charge.
The result should be a short schedule that starts with the opening balance owed to or by SARS, adds the year's charge, deducts payments and ends with the closing figure in the statements.
Kenyan readers will recognise the same pattern with instalment tax; Kenya's tax note and instalments payable covers that version.
Posting the adjustment in Achekam
Once the schedule is agreed, the journal that brings the tax account to the right figure is a year-end adjusting entry. Achekam lets staff post a year-end adjusting entry, and a wrong one is reversed with a record of who did it and why, never deleted. That record matters in a review: the reviewer can see the first attempt, the reversal and the corrected entry rather than a balance that simply changed.
The same principle applies elsewhere in the year-end file. Achekam does not calculate depreciation, for example; it presents the depreciation in the trial balance, flags when the charge does not agree with the accumulated depreciation movement, and leaves the correcting entry to staff.
Filing stays with the firm. Achekam does not submit tax returns or payroll declarations to SARS; the firm files them itself on eFiling and records the filing in Achekam. The provisional tax returns and the annual company return are no exception.
Read the dates on SARS's page
SARS's provisional tax page sets out who is a provisional taxpayer and when each payment is due. Keep it open while preparing the schedule, and check that the client's third payment, if any, is recorded in the right year when next year's file is opened.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
