Navigating the world of administrative penalties might seem like a daunting task, especially if you don’t have a financial background. In this blog post, we break down the basics, offering clarity on what administrative penalties are, why they matter, and how to manage them.
What is an Administrative Penalty?
An administrative penalty, often referred to as an “admin penalty,” is essentially a fine imposed by SARS under section 210 of the Tax Administration Act (TAA). This act outlines specific situations of non-compliance that can lead to fixed amount penalties.
When would you incur an Admin Penalty?
For Individuals (Personal Income Tax):
Starting December 1, 2022, if you haven’t submitted your income tax returns from 2007 onwards and you have outstanding returns, you may face penalties.
For Companies (Corporate Income Tax):
Companies can incur penalties if they fail to submit income tax returns as required by the Income Tax Act. This applies to years ending in 2009 and subsequent years, following a final demand from SARS and a failure to submit the return within 21 business days.
Regardless of whether you agree or disagree with the admin penalty, it’s advisable to submit outstanding returns promptly to prevent further penalties. The penalty can recur monthly for a maximum of 35 months.
If you have any outstanding or un-filed tax returns from prior years, chances are high that SARS will have charged you administrative penalties.
You may have recently received an email or SMS from SARS informing you of a Penalty Statement of Account having been issued to you. It will look something like this:
We strongly suggest you check this out on E-filing and if there is a fee then you need to rectify the situation ASAP. Simply login to your E-filing account and click on SARS Correspondence. If you received an email/sms then there should be a letter there with the description “Income Tax Penalty Statement of Account”. Click on that to see if you have any admin penalties due.
If you did not receive an sms/email or you don’t find your Penalty Statement of Account under SARS Correspondence, check for a tab labelled “Request Admin Penalty SOA” and then you can select each year to see if you have any penalties due.
Understanding the Penalty
The penalty for non-compliance is a fixed amount based on your taxable income, ranging from R250 to R16,000 per month. These penalties will be incurred each month, up to a maximum of 35 months with each month having a unique transaction number.
You need to get on this quite soon because SARS will continue to issue you with monthly administrative penalties until you submit the outstanding tax return. This cost will add up very quickly so the sooner you can submit your returns the better. These admin penalties will be deducted from any refunds due.
The correct payment details are on the Penalty Statement of Account.
Important: Make sure you use the correct payment reference number or SARS will not be able to allocate your payment to your account.
What if you don’t agree with the Penalty?
If you disagree with the penalty and you have a valid reason for not submitting a tax return such as:
– Serious illness
– Sequestration
– Liquidation
– Death
– Not being liable to file a tax return (e.g you earn less than the tax threshold)
– SARS error (e.g system error which prevented you from submitting your tax return)
Then you can submit a Request for Remission (RFR).
But first, you need to submit your outstanding returns. THEN you can file a dispute.
The Dispute button is at the top of your Statement of Account. Filing a dispute involves providing reasons for the non-compliance. Make sure you give as much detail as possible as SARS is extremely strict and won’t grant leniency unless your case is well justified. If the RFR is disallowed or only partially allowed, you can proceed to object to SARS’ decision and even appeal if needed.
How to request an RFR (Request for Remission)
You can request an RFR via E-filing or at a SARS branch (remember to make an appointment). The actual submission of the RFR can also be done through E-filing or at a SARS branch.
How to pay your Admin Penalty:
Payment can be made through various channels. You can pay via E-filing, at a bank or via EFT.
If you can’t make a full ‘once off’ payment, you can explore deferred arrangements with SARS. You can contact SARS on contactus@sars.gov.za. You will need to be open and honest about your financial situation.
Remember:
– SARS may still decline your request
– Interest will accrue on your unpaid balance
– If SARS does allow you a payment arrangement and you still fail to make payment, then the arrangement will fall away and you will have to pay the full amount.
You can contact SARS here for debt queries.
What Happens if you don’t pay?
If the admin penalty isn’t paid, SARS may appoint an agent (such as your employer) to collect the money on its behalf.
Understanding and navigating administrative penalties doesn’t have to be overwhelming. By staying informed and taking proactive steps, you can manage these situations effectively. If you have any questions or concerns, don’t hesitate to reach out to us.
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