Beware of the penalties of missing a tax return
In July 2021, the South African Revenue Service (SARS) ramped up its collection power by imposing a series of administrative non-compliance penalties for the non-submission of tax returns, as defined in Section 210 of the Tax Administration Act.
As of 1 December 2021, penalties will apply if you have two or more outstanding income tax returns from the 2007 to 2020 tax years of assessment; or one or more outstanding tax returns from (and including) the 2021 tax year of assessment. From 1 December 2022, non-compliance penalties will be levied on any outstanding income tax returns from 1 March 2006. Penalties will range from R250 per month to R16 000 per month, depending on the taxable income of the taxpayer:
|Taxable Income for Preceding Year||Monthly Penalty|
|R0 – R250 000||R250|
|R250 001 – R500 000||R500|
|R500 001 – R1 000 000||R1 000|
|R1 000 001 – R5 000 000||R2 000|
|R5 000 001 – R10 000 000||R4 000|
|R10 000 001 – R50 000 000||R8 000|
|Above R50 000 000||R16 000|
Currently, the penalties only apply to non-submission of returns by individuals and companies. The criteria are slightly different for each entity: The SARS website gives clarity on how the penalties will be levied in each case.
Life happens – maybe you missed a return due to a filing error, a delayed payment or malpractice. Or maybe you’re unaware that you have outstanding returns. The important message here is that you remedy the situation as fast as possible.
Financial losses will mount up quickly unless you take remedial steps. Plus, if you don’t file your returns, you will be unable to obtain a refund from SARS due to non-compliance, and you might even face criminal charges. Continuous non-compliance can lead to criminal prosecution.
I’ve missed a return – what now?
If the matter of your non-compliance is not in dispute, then you should simply remedy the situation. Submit the outstanding tax return that you have been penalised for and pay the penalty amount by the due date.
However, if you dispute the penalty or penalties, SARS allows for the taxpayer to submit a request for remission (RFR) using the prescribed RFR1 form. Such an application will only be considered if all outstanding tax returns are submitted by the due date stipulated in the penalty notice. The only exceptions are if the missing returns are not liable, if they’re missing due to SARS error, or due to the death of the taxpayer.
In the RFR, you must provide evidence of exceptional circumstances that led to your non-compliance. Penalties will only be waived if those circumstances were beyond your control.
There’s one snag: The RFR service is usually available on e-filing, but SARS is currently experiencing difficulties with the form. As a result, the disputes can only be lodged via an online appointment. This might change in the future; we will keep you updated.
I don’t know if I’m compliant…
Tax can get tricky, especially if you have various sources of income and a complex estate. We’re here to help. Our professionals are experts in all fields of tax, both locally and internationally. We can remedy non-compliance and streamline your returns process so that you never have to pay unnecessary penalties again.
As a matter of good practice, we recommend that you always submit all returns, even if they are not required by SARS or flagged as outstanding – not only to avoid penalties but also to avoid future problems such as the non-issuing of tax clearance certificates and the withholding of refunds.
If in doubt, reach out to the Sentinel International Team of tax experts.