SARS has a new rule for dealing with tax penalties – what you need to know
The South African Revenue Service (SARS) has become stricter with the implementation of penalties, says Reinert van Rensburg, an attorney and tax expert at Leap Group.
This is not a problem for taxpaying South Africans – however, those who have not submitted tax returns are likely to become a target of the taxman.
SARS is currently in the process of issuing penalties for late submissions. In the group’s latest Tax Practitioner Newsletter for January/February 2023, it warned service providers and taxpayers at large to take action should they receive a notice.
“If you or your client received a Personal Income Tax Administrative Penalty notification, please note that this was issued due to the late or non-submission of one or more Income Tax Returns,” it said.
“To remedy this, please submit outstanding returns as soon as possible. Failure to do so will result in a monthly recurring admin penalty being levied until the non-compliance is remedied.”
At the end of the 2021 filing season, SARS issued a notice that it would levy late submission of return penalties if the 2021 return is not submitted on time, said Van Rensburg.
This move has spawned a new general rule that if a taxpayer fails to submit a return, a penalty will be levied immediately based on the one outstanding or late return.
“Previously, SARS only levied penalties for the late submission of a return if two or more tax returns are outstanding,” he said.
“Up until now, a penalty was levied if an income tax return is not submitted as required under any tax Act, but it was subject to the number of returns outstanding. If the taxpayer was refusing to meet their obligation to submit a tax return for the tax years 2007 to 2020, and two or more returns were outstanding, SARS levied an administrative penalty,” he said.
“However, SARS announced that it will be levying penalties for the late submission of returns if any single tax return from 2007 to 2020 is outstanding effective from 1 December 2022.”
SARS made it clear that it would only be applicable to the 2021 tax return going forward, however, and not previous returns.
How much?
The penalty amount is subject to the taxable income of the tax assessment in question, said Van Rensburg. It is determined in line with the penalty table:
The penalty is payable for every month the amount is outstanding – this can reoccur up to a maximum of 35 months of non-compliance.
It is inevitable that individual taxpayers who are not submitting their tax returns will need to pay penalties to SARS, van Rensburg said.
SARS receives third-party information from employers, banks, financial institutions and medical aids – to predetermine a taxpayer’s taxable income and tax liability.
“This information needs to be confirmed by the taxpayer themselves and be submitted to SARS. Failure to do so will lead to penalties that need to be paid.”
Expat tax
South Africans working abroad receiving foreign income – remain taxable domestically if they are a resident.
Income earned abroad is exemption foreign tax credits under the Foreign Exemption and most often, it is also not subject to PAYE.
Despite these advantages, the expatriate taxpayer must register as a provisional taxpayer if his foreign income will result in a tax liability of more than R30 000 after the Foreign Exemption and foreign tax credits are applied.
“Failure to include the foreign income in provisional tax returns might lead to understatement penalties of up to 200% of the shortfall during the annual return submission,” said Van Rensburg.
This can result in a sizeable liability for the taxpayer, van Rensburg said.
Non-resident
To divorce oneself from the South African taxable base, you must be a non-resident of the country.
However, to do so, all tax returns need to be up to date, and all outstanding taxes or penalties need to be paid.
This creates a problem for South Africans who departed the country several years ago and now need to formalise their non-residence with SARS to obtain their Notice of Non-Resident tax letter required for external processes, van Rensburg said.
“These taxpayers will need to submit all outstanding tax returns to SARS, which will be subject to the new penalty rules and lead to several penalties being levied,” he added.
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