[Question] Company provisional tax overpayment

[duncan drennan]

How does SARS handle an overpayment of company tax? In my first year of business I ended up overpaying tax, but there was never a refund for that overpayment. Does SARS ever actually pay back overpaid tax to companies, or are you just expected to pay less against any future credits?

[Dave A]

I've had refunds from SARS for overpayments on company tax before...

It took a little while to figure it was from SARS though. The reference on the deposit was not particularly intuitive and at first it ended up being posted to our unallocated receipts.

[duncan drennan]

I'll have to chat to my accountant, as there was definitely not a refund.

[Morticia]

A provisional tax payment is only consolidated against your assessed tax account once SARS issues the assessment for that particular tax year. If the financial statements reflect a loss/NIL assessment, the overpayment must then be refunded. It's possible that the assessment has already been processed, but the refund is still subject to audit or withheld by SARS due to some other outstanding issue on e.g. VAT, PAYE, etc.? Also ensure that your banking details at SARS are correct and updated. Unless you ask for feedback, they will not volunteer that they have this refund owing to you but need some information.........

You are also no longer allowed to use such a credit to set it off against another liability which sometimes puts a spanner in your cashflow works, but hey, thats SARS for you.

[taxlibrary]

The good news is that, for the first time, SARS may have to start paying interest on such overpayments. It was proposed in the latest budget speech:

http://www.taxlibrary.co.za/budget.html

[Dave A]

Would that be interest from the date the provisional payment was made?
I thought SARS was already paying interest on refunds from a date shortly after assessment anyway. Of course, normally they refund before the interest kicks in.

[taxlibrary]

Apologies, I was thinking of overpayments that are in dispute:
The Income Tax and VAT Acts do not require SARS to pay interest on the overpayment of tax when a taxpayer is required to pay a disputed amount while the amount is subject to objection – with the objection subsequently being allowed. This non-payment of interest is arguably contrary to one of the core principles on which the constitutionality of the “pay now argue later” principle is based. In order to address these concerns, it is proposed that the Income Tax and VAT Acts be amended to:
(i) clarify that payment is not
suspended due to objection,
(ii) formalise the circumstances where payment will
be required despite objection, and
(iii) provide for interest where a payment made
pending consideration of an objection is refunded.