1900. Provisional tax and paragraph 19(3)  

For every provisional tax period, a provisional taxpayer is required to submit an estimate to SARS of 

taxable income for that particular year of assessment. For the first provisional tax payment, which is 

due six months into a taxpayer’s year of assessment, this estimate may not be less than the taxpayer’s 

“basic amount”. This is in accordance with paragraph 19(1)(c) of the Fourth Schedule to the Act No. 

58 of 1962. The taxpayer’s “basic amount”, which is defined in paragraph 19(1)(d), is essentially the 

taxpayer’s taxable income as assessed by SARS for the latest preceding year of assessment, uplifted 

by 8% per annum. 

Paragraph 19(3) empowers SARS to call upon a taxpayer to either justify  their provisional tax 

estimate or to furnish SARS with further information. 

The taxpayer is entitled to respond to the enquiry raised by SARS and is afforded the opportunity to 

satisfy SARS that the estimate is in fact reasonable in relation to the taxable income likely to be 

earned for that year of assessment. 

If, based on the taxpayer’s response to its enquiry, SARS believes that the taxpayer’s estimate is too 

low, it may exercise its discretion to increase the taxpayer’s estimate to an amount that it considers to 

be reasonable. SARS must, however, have sufficient information available to substantiate this 

increase. This revised estimate will be final and conclusive and SARS must notify the taxpayer of a 

revised date for payment of the additional amount. 

It is important to note that while SARS is required to pay taxpayers interest on provisional tax 

payments where these exceed the final tax liability for that tax year, this interest only starts running 6 

or 7 months after the end of the taxpayer’s year of assessment, so that any overpayment of provisional 

tax is financially prejudicial to the taxpayer. This interest is taxable and must be disclosed by the 

taxpayer in the tax year that it accrues. 

Interpretation Note 1 (dated 30 November 2001) replaced Circular Minute 22 of 1998 and provides 

guidelines on the application of paragraph 19(3).  

The Circular Minute had provided that paragraph 19(3) would only be invoked by SARS where the 

revised taxable income exceeded the “basic amount”  by R2 million in the case of a company and    

R1,5 million in the case of an individual. Interpretation Note 1 on the other hand, is silent on when 

paragraph 19(3) will be invoked by SARS and this appears to have prompted regional offices of 

SARS to utilise paragraph 19(3) on a regular basis in an attempt to increase its cash flows and make 

up the apparent shortfall in its revenue collections. 

So, where a taxpayer (with only 5 to 6 months financial results available to him) bases his first 

provisional tax estimate on his escalated “basic amount” he is almost assured of receiving a paragraph 

19(3) enquiry from SARS. And, if SARS is of the view that the taxpayer should pay tax on a higher 

estimate, the taxpayer will not earn interest on the provisional tax paid until 6 or 7 months after the 

end of the year of assessment. Even where the escalated basic amount is exceeded in the taxpayer’s 

estimate, SARS will frequently issue a notice asking why the estimate is not higher still. 

Paragraph 19(3) was originally introduced to equip SARS with a mechanism by which to combat the 

mischief of taxpayers understating their provisional tax payments. But since paragraph 19(1)(c)