What is SARS Penalty Assessment?

A penalty assessment at SARS (South African Revenue Service) refers to the process whereby SARS imposes penalties on taxpayers for various non-compliance issues, such as late submissions of tax returns, failure to pay taxes on time, or submitting incorrect information on tax returns. These penalties are part of SARS’s enforcement mechanisms to ensure compliance with tax laws and regulations in South Africa.

Types of Penalties

• Late Submission Penalty: A penalty imposed for not submitting tax returns by the due date.
• Examples:
  • A fixed amount penalty for late submission of personal income tax returns.
  • Percentage-based penalties for late submission of VAT returns.
• Understatement Penalty: A penalty for under-declaring income or overstating deductions, resulting in a lower tax payable amount.
• Examples:
  • Penalties ranging from 10% to 200% of the tax shortfall, depending on the behavior (negligent to intentional tax evasion).

Calculation of Penalties

• Fixed Amount Penalties: Pre-determined amounts based on the type of tax and the period of non-compliance.
• Examples:
  • A fixed penalty of R250 for each month that a personal income tax return is late.
• Percentage-Based Penalties: A percentage of the tax due, varying according to the severity of the non-compliance or the understatement of tax.
• Examples:
  • A 20% penalty on the unpaid amount for late payment of VAT.

Penalty Assessment Process

• Notification: Taxpayers are notified of penalties through their registered details on the SARS eFiling system or via post.
• Examples:
  • An email or SMS notification from SARS indicating a penalty has been applied.
  • A letter posted to the taxpayer’s address detailing the penalty.

Disputing a Penalty

• Objection Process: Taxpayers have the right to object to a penalty if they believe it has been wrongly applied.
• Examples:
  • Submitting an objection through the SARS eFiling system, outlining the reasons for disagreement with the penalty.
  • Providing supporting documents to SARS as evidence for the objection.

The penalty assessment process by SARS is a critical tool for encouraging tax compliance among taxpayers in South Africa. It emphasizes the importance of adhering to tax obligations and allows for the fair enforcement of tax laws.