SARS Penalties: Late Filing, Underpayment and How to Dispute
SARS imposes various penalties on taxpayers who do not comply with their tax obligations. These include penalties for late filing of returns, late payment of tax, underestimation of provisional tax and intentional tax evasion. Understanding these penalties helps you avoid them and dispute them when they are incorrectly imposed.
Types of SARS Penalties
| Penalty Type | Trigger | Amount |
|---|---|---|
| Administrative non-compliance penalty | Late or non-submission of a tax return | R250 to R16,000 per month depending on income |
| Late payment penalty | Tax paid after the due date | 10% of the unpaid amount |
| Underestimation penalty (provisional tax) | Second provisional payment estimate below 80-90% of actual income | 20% of the shortfall |
| Understatement penalty | Incorrect information in a return (negligence to fraud) | 25% to 200% of the shortfall |
| Interest on late payment | Any tax paid after the due date | Prescribed rate (currently prime + 3.5%) |
Penalties accumulate monthly. A return that is 12 months late for a person earning R300,000 would incur R6,000 in penalties (R500 x 12 months), plus interest on any tax owing.
Administrative Non-Compliance Penalties for Late Filing
If you do not file your tax return by the deadline, SARS automatically imposes an administrative non-compliance penalty. The penalty is charged monthly for each month the return remains outstanding and depends on your taxable income.
| Taxable Income | Monthly Penalty |
|---|---|
| R0 - R250,000 | R250 per month |
| R250,001 - R500,000 | R500 per month |
| R500,001 - R1,000,000 | R1,000 per month |
| R1,000,001 - R5,000,000 | R2,000 per month |
| R5,000,001 - R10,000,000 | R4,000 per month |
| R10,000,001 - R50,000,000 | R8,000 per month |
| Above R50,000,000 | R16,000 per month |
Late Payment Penalties and Interest
A flat 10% penalty is levied on any tax amount not paid by the due date. This is in addition to interest at the prescribed rate, which is currently the prime lending rate plus 3.5% per annum.
Interest accrues daily from the date the tax was due until the date of payment. For significant tax amounts, the interest alone can be substantial, which is why it is always advisable to pay on time or enter into a payment arrangement with SARS.
Grounds for remission include: serious illness or death of the taxpayer or immediate family, natural disaster, SARS error, circumstances beyond your control such as a banking system failure or postal delays.
How to Request Remission of Penalties
SARS has a process called Remission of Administrative Penalties (RAP) that allows taxpayers to request that penalties be waived or reduced. SARS may grant remission if you can show that exceptional circumstances prevented compliance.
- Log in to www.sarsefiling.co.za.
- Navigate to Services > Manage Penalties (or check your compliance dashboard).
- Select the penalty notice you wish to dispute.
- Click Request Remission and complete the online form.
- Provide a detailed explanation of why the penalty should be remitted (e.g., serious illness, natural disaster, SARS system error, incorrect information received from SARS).
- Attach supporting documents such as medical certificates, death certificates or bank statements.
- Submit the request. SARS will respond within 21 business days.
Understatement Penalties
Understatement penalties apply when a return contains incorrect information that results in less tax being paid than was actually due. The penalty percentage depends on the behaviour of the taxpayer and whether there was a tax avoidance scheme involved.
Penalties range from 25% (reasonable care not taken) to 200% (intentional tax evasion or a tax avoidance scheme with a financial instrument). These are serious penalties and may also result in criminal prosecution for tax fraud.
| Behaviour | Standard Rate | Repeat Offence | Voluntary Disclosure |
|---|---|---|---|
| Reasonable care not taken | 25% | 50% | 0% |
| No reasonable grounds for tax position | 50% | 75% | 5% |
| Gross negligence | 75% | 100% | 10% |
| Intentional tax evasion | 150% | 200% | 20% |
Voluntary Disclosure Programme (VDP)
The SARS Voluntary Disclosure Programme allows taxpayers to come forward and correct past non-compliance before SARS discovers it. Benefits include reduced penalties and no criminal prosecution for disclosures made in good faith.
To apply, submit a VDP application on eFiling or in writing to SARS. This is a formal process and it is strongly recommended to engage a tax practitioner before applying.