The South African Revenue Service (SARS) has announced the start dates and details for the 2022 tax season, with the tax authority warning of penalties for South Africans who fail to submit timeously.
From a taxpayer perspective, the importance of submitting tax returns, specifically within stipulated deadlines, is supported by the sanctions SARS can impose to the extent that these obligations are not complied with, says Tsanga Mukumba, an associate at Cliffe Dekker Hofmeyr.
Where taxpayers fail to submit returns by the relevant deadline, the South African Revenue Service (SARS) is under certain circumstances, empowered to issue an assessment of the amount of tax due and impose certain penalties, he said.
“For example, if a taxpayer fails to submit a return, section 95 of the Tax Administration Act empowers SARS to issue an assessment based on an estimate, using information readily available to SARS. Such an estimated assessment can only be challenged once the taxpayer has duly submitted the outstanding return,” he said.
“In addition to being able to issue an assessment which will result in the taxpayer being liable for amounts of tax, SARS may levy administrative non-compliance penalties under section 210 of the Tax Administration Act and understatement penalties under section 222 of the Tax Administration Act.”
Mukumba noted that SARS may impose an administrative non-compliance penalty when a taxpayer has failed to comply with their obligation to submit a return. These penalties are imposed for every month during which the non-compliance persists.
He added that the amount of the penalty is based on the taxpayer’s assessed loss or taxable income for the preceding tax year.
“Where a taxpayer has an assessed loss, each monthly administrative non-compliance penalty may be R250, while where a taxpayer has taxable income of R50,000,001 or more, the penalty may be R16,000 per month.
“SARS is similarly empowered to impose an understatement penalty, where the non-submission of a return has prejudiced SARS or the fiscus and resulted in a shortfall.”
Mukumba said such a shortfall exists in circumstances where there is a difference between the amount of tax that would have been collected under a return submitted or outstanding, and the amount of tax that ought to be collected upon a proper application of the relevant tax legislation.
“The amount of the understatement penalty is determined based on the culpability of the taxpayer and ranges between 0% of the shortfall where the non-compliance is disclosed under the voluntary disclosure programme and 200% of the shortfall, where the taxpayer is guilty of intentional tax evasion.”