What It Means When Companies Receive Admin Penalties From SARS

In South Africa, businesses are required to comply with a range of tax regulations, including filing returns and paying taxes on time. However, failure to meet these obligations can result in administrative penalties imposed by the South African Revenue Service (SARS). Here is a detailed description of how and why these penalties are issues, and what businesses need to know about avoiding or handling them.

What Are Admin Penalties? Admin penalties are financial fines imposed by SARS on companies for non-compliance with specific tax obligations, namely the late submissions of returns. These penalties are not criminal charges but rather administrative charges for failing to meet the requirements set out by tax laws.

Admin penalties are calculated based on the time lapsed before submitting returns, and it is designed to encourage compliance with tax regulations. While the amount of the penalty can vary, it can accumulate over time if the business continues to neglect its obligations and miss deadlines. These admin penalties can vary between R250 to R16 000 per month. The admin penalties on an outstanding return recur every month, up to a maximum of 36 months.

Common Reasons for Admin Penalties Businesses and individuals incur admin penalties for failing to submit tax returns on time. Whether it’s VAT returns, income tax returns, or employee tax (PAYE) submissions, the late filing of these returns can result in penalties. SARS offers businesses a fixed deadline for each type of return, and missing these deadlines without valid reason can trigger penalties.

Calculations of Admin Penalties Admin penalties are calculated based on the taxable income/loss of the preceding year, based on the penalty table in Section 211(1) of the TAA. These penalties start at R250 per month, based on a taxable loss to a taxable income of R250 000 in the preceding year, and the maximum penalty is R16 000 per month based on a taxable income above R50 million in the preceding year.

How to Avoid Admin Penalties Businesses can take proactive steps to avoid administrative penalties from SARS by honouring the deadlines of submissions and submit returns on time.

Should you need assistance, you can engage with a qualified tax professional that can provide valuable guidance in navigating the complex landscape of South African tax laws. Professionals can help ensure compliance and avoid costly mistakes.

Business Services can assist with the above-mentioned steps to avoid admin penalties. Business Services provides their clients with accurate financial records in a timely manner, which ensures the compliance of their clients.