Tax Practitioner Connect Issue 40 (February 2023) | South African Revenue Service

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Tax Practitioner Connect Issue 40 (February 2023) | South African Revenue Service

• 23 March 2023
• Tax Administration
• SARS

Understanding how SARS imposes admin penalties

In the January 2023 Connect newsletter, we advised tax practitioners of the imposition of admin penalties due to late or non-submission of tax returns. In this edition, we will speak more on the process SARS follows in imposing admin penalties. The purpose of imposing administrative non-compliance penalties is to ensure:

• the widest possible compliance with the provisions of a Tax Act and the effective administration of Tax Acts; and
• that they are imposed impartially, consistently and proportionately to the seriousness and duration of the non-compliance.

Admin Penalties for PAYE

Administrative penalties will be imposed for PAYE where an employer has failed to submit an EMP501 reconciliation declaration on time (i.e., after the final due date for submission):

• Administrative penalty will be implemented in 1% increments over 10 months from June 2021 in respect of the reconciliation ending 28/29 February 2021 and for subsequent years. A penalty up to a maximum of 10% will be levied if the reconciliation is not submitted during the 10 months from June 2021.
• Administrative penalties will be based on the employer’s liability over a period of 12 months:
  • For administrative penalties to be imposed the employer should have submitted 1 or 12 EMP201’s. If less than twelve (12) EMP201s were submitted, the system will calculate the average of submitted EMP201s and multiply by 12 to calculate an estimated total aggregate employee liability for the year.
  • Where there is no EMP201 with a liability the administrative penalty will be charged retrospectively once either the EMP201 or EMP501 with a liability is submitted.
• If the EMP501 is received at any point during the 10 months after the close of the Filing Season, the 1% incremental administrative penalty will stop to recur.

Administrative penalties will only be charged if a full month has passed without the reconciliation being submitted, e.g. if the reconciliation is submitted during the month of August, administrative penalties will only be levied for June and July and not for August.

Admin Penalties for Personal Income Tax (PIT) and Corporate Income Tax (CIT)

Penalties will be imposed for Personal Income Tax (PIT) and Corporate Income Tax (CIT) as a fixed amount administrative non-compliance penalty (referred to as Penalty).

PIT Once Off Penalty

As from 2020 year of assessment onwards a once off penalty will be imposed where the taxpayer submitted a return late under the following conditions for auto assessed population:

• If a return is subsequently submitted by the taxpayer after the auto original estimate assessment is issued by SARS and the financial information on the 2020 tax return have been edited, or
• If the return was received from 1 December 2021 and the taxpayer has one or more outstanding returns in addition to 2020 return; or
• If the return was received before 1 December 2021 and the taxpayer has two or more outstanding returns in addition to 2020 return up to; or
• If return was submitted from 09 January 2023 and the taxpayer has one or more outstanding returns from 2007 to 2020 years of assessment with no retrospective application.

As from 2020 year of assessment onwards a once off penalty will be imposed where the taxpayer submitted a return late under the following conditions for non-auto assessed:

• If the return was received from 1 December 2021 and the taxpayer has one or more outstanding returns in addition to 2020 return; or
• If the return was received before 1 December 2021 and the taxpayer has two or more outstanding returns in addition to 2020 return; or
• If return was submitted from 09 January 2023 a once off penalty will be imposed where the taxpayer has one or more outstanding returns from 2007 to 2020 years of assessment with no retrospective application.

The Recurring Penalty

• For PIT, the recurring penalty will be imposed where the taxpayer has failed to submit a return as and when required under the Income Tax Act for years of assessment commencing on or after 1 March 2006 where that person has two or more outstanding income tax returns for such years of assessment:
  • As from 1 December 2021 a PIT penalty will be imposed where the person has one or more outstanding income tax returns for such years of assessment.
  • As from 09 January 2023 a PIT penalty will be imposed where the person has one or more outstanding income tax returns from the 2007 to 2020 years of assessment with no retrospective application.
• For CIT, it will be imposed where the company has failed to submit an income tax return as and when required under the Income Tax Act for years of assessment ending during the 2009 and subsequent calendar years, where SARS has issued that company with a final demand referring to the public notice and requiring the submission of the outstanding income tax return, and the company failed to submit the return within 21 business days of the date of issue of the final demand; and
• It will recur every month that the relevant non-compliance is not remedied on or before the due date as per the AP34 (Penalty Assessment Notice), for a maximum of:
  • 35 months where SARS is in possession of the taxpayer’s current address and able to deliver the AP34.
  • 47 months where SARS is not in possession of the current address because the taxpayer failed to update his / her details with SARS and SARS is therefore unable to deliver the AP34.

Excise – Submission and payment dates

The Excise submission and payment dates for 2023/2024 have been published.

Trust Registration Beneficial Owners Details

In order to comply with the Financial Action Task Force (FATF) requirements, SARS aims to record all beneficial owners of newly registered Trusts. The Trust Registration query on SARS Online Query System has been enhanced to allow for the capturing of the beneficial owner’s details. For more information, see the updated Guide for the SARS Online Query System.

Individual provisional taxpayers’ deadline

Individual provisional taxpayers are required to submit their second provisional tax return (IRP6) before or on 28 February 2023. This is for the tax year 2023, which runs from 1 March 2022 to 28 February 2023. Two provisional tax returns are required from individual provisional taxpayers during a tax year: one for the first six-month period (due end of August) and one at the end of the tax year (due end of February).

Who is a provisional taxpayer: A provisional taxpayer is any person who receives income or to whom income accrues other than remuneration, an allowance, or an advance. If you have other sources of income above your salary that meet the requirements for provisional tax, you may be a provisional taxpayer. Important note: earning extra income does not automatically make you a Provisional taxpayer. Your income must meet the requirements for provisional tax for you to qualify as a provisional taxpayer.

Submission requirements: In relation to the second period, as a provisional taxpayer, you are required to estimate your taxable income for the full tax year and submit a provisional tax return, together with payment where applicable (after having considered any provisional tax payment made in the first period and any employees’ tax paid for the tax year). Click here to calculate the provisional tax payable.

How to file: Activate your provisional tax status on your eFiling profile by selecting the ‘User’ and ‘Tax Products’ tabs.  Once activated, select the ‘Returns’ tab to access your provisional tax (IRP6) return.

For more info, see the Provisional Tax webpage.

Webinar on Tax Directives

SARS hosted a webinar on Tax Directives to assist taxpayers to comply with their tax obligations. This will be of interest to employers, and tax practitioners who have employers as clients are invited to share details of this webinar with them.

A tax directive is an official instruction from SARS to a taxpayer’s employer or fund manager to deduct tax at a set rate, determined by SARS. This directive ensures that a fair tax rate is paid on your earnings, especially for larger or irregular payments. An approved tax directive is only valid for the tax year or period that it was applied for.

The following topics were covered:

• Types of Tax Directives
• Type of Tax Directives by Tax Practitioners on behalf of Individuals and Employers
• Tax Directive application process
• Timelines for the Tax Directives applications
• Tax Directive updates/ changes
• Access to Tax Directives via eFiling

The recording of the webinar can be accessed as follows:

YouTube:  https://youtube.com/live/CrjDUA3Tzm0?feature=share

Click here to view the presentation.

Pinetown branch closure

For tax practitioners operating out of KZN, please note that the Pinetown branch has closed at its current address of 36 Kings Road, Pinetown. A Pop-up Branch will be reopening at Union Main Centre (parking area), 45 Josiah Gumede Road, Pinetown on 20 February 2023. Operating hours:  08:30 – 15:00 Monday, Tuesday, Thursday and Friday; 09:30 – 15:00 Wednesday. All current services will be offered at the new location by appointment.

Source: SARS

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