How to deal with SARS admin penalties
SARS charges us penalties for the following reasons:
- A tax return was not submitted or not submitted correctly; or
- Payment due to SARS was late or insufficient
SARS charges administrative penalties specifically when no tax return is submitted or submitted late, even if the company is not making money. A lot of people don’t realize that their companies are obligated to submit tax returns even if the company is not trading.
The admin penalty amount is based on a taxpayer’s taxable income and can range from R250 up to R16 000 per month for each month that the return is outstanding. Admin penalties are charged up to a maximum of 35 months and can accumulate quickly if a taxpayer is not careful. SARS will usually only call you once the amount has become very large and often this is the first time a taxpayer realizes there is even an issue on their tax account.
What to do when you have an admin penalty
First thing is to submit that outstanding tax return to stop the penalties from increasing. After that, you can either pay the penalty or you can object to it. The main thing you need to object to admin penalties is grounds for objection. SARS accepts the following as grounds for objection:
- SARS has made an error
- Serious Illness
- The taxpayer does not need to file the return
- Other/ Mitigation Factors
The most common grounds for objection are Other/Mitigation Factors'. This means you must include a detailed account of why the tax returns were not submitted on time and what steps were taken to ensure this does not happen again.
The SARS objection process
The process of objection has three main steps which are all done on efiling:
- Step 1: complete and submit the Request for Remission (RFR) form. SARS considers the information and can decide to Allow (fully reverse all penalties), Disallow (fully reject the request), or Partially Allow (reverse a portion of the penalties).
- Step 2: If SARS decides to Disallow or Partially Allow the RFR and you can file a Notice of Objection (NOO). The request is reviewed again by SARS officials.
- Step 3: If SARS does not change its decision, then the taxpayer can file a Notice of Appeal (NOA), which is the final part of the process.
If you decide to make the objection, remember to include all relevant information in Step 1 as you generally are not allowed to include further information during the other two steps.
To avoid being in this situation at all, it would be best to remain tax compliant at all times. Need help? Get assistance with company tax returns.