SA tax penalties on companies

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SA tax penalties on companies

• 06 May 2020
• Corporate Tax
• Nico Theron

Monday, 07 January 2019

Important:

This article is based on tax law for the tax year ending 28 February 2019.

Author: Nico Theron

On 14 December 2018, the public notice that allows the South African Revenue Service (“SARS”) to impose penalties on companies for not submitting income tax returns was gazette. This is a new addition to the legion of penalties already faced by companies and permits the imposition of a monthly penalty on a company ranging from anything between R250 to R16 000 a month.

Other penalties also faced by companies include:

• A 10% penalty for not filing a VAT return on time (if VAT registered);
• A 10% penalty for not filing a employees’ tax return on time (if registered as employer)
• A 10% penalty for not filing a provisional tax return on time;
• A 20% penalty for not accurately submitting a provisional tax return; and
• A penalty ranging from anything between 5% and 200% in the case of a taxpayer making an understatement.

Ensuring tax compliance by corporates is obviously important, hence the always lingering threat of sanction in the form of a monetary penalty for non-compliance. However, ensuring tax compliance should never amount to an abuse of power or infringement of taxpayer’s rights.

Please click here to read more.

This article first appeared on unicustax.co.za.

 

FAQs

1. What is the penalty for a company failing to submit an income tax return? 

SARS can impose a monthly administrative penalty for non-submission. Depending on the company's taxable income or assessed loss, this penalty ranges from R250 to R16,000 per month.

2. How much is the penalty for late VAT payments? 

If a company is VAT registered and fails to file/pay on time, SARS imposes a 10% penalty on the unpaid amount.

3. What are the penalties for late PAYE returns? 

Companies registered as employers face a 10% penalty if they fail to file their Employees' Tax (PAYE) returns on time.

4. Can SARS penalize a company for underestimating provisional tax? 

Yes. If a provisional tax return is not submitted accurately (underestimation of liability), a penalty of up to 20% can be levied.

5. What is the penalty for late submission of a provisional tax return? 

Failure to file a provisional tax return on time attracts a 10% penalty.

6. What is an understatement penalty? 

If a taxpayer makes a substantial understatement of tax payable (e.g., by omitting income or overstating expenses), SARS can levy a percentage-based penalty ranging from 5% to 200%, depending on the severity and behavior (e.g., gross negligence or intentional tax evasion).

7. Do dormant companies still face penalties? 

Yes. The obligation to file returns exists as long as the company is registered. Failure to file can trigger the monthly administrative non-compliance penalty, even if the company has no income.

8. When did the monthly administrative penalties for companies start? 

The public notice allowing SARS to impose these specific monthly penalties for outstanding corporate income tax returns was gazetted on 14 December 2018.

9. Are there recurring penalties for non-compliance? 

Yes. The administrative penalty for outstanding returns is a monthly penalty. It recurs for every month the return remains outstanding, up to a certain cap.

10. Can company tax penalties be disputed? 

Yes. If a company believes a penalty was imposed unfairly (e.g., due to a SARS error or valid exceptional circumstances), they can request a remission of penalties or lodge an objection through the standard dispute resolution process.

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