The True Cost of Non-Compliance
Few things unsettle business owners like a SARS penalty notice. Whether it’s for late payment, under-declaration, or administrative oversight, penalties can escalate quickly, and once imposed, reversing them isn’t simple.
Understanding how these penalties work and how to prevent them is essential for maintaining financial stability and credibility with SARS.
Types of SARS Penalties
1. Administrative Penalties
Applied for recurring non-compliance, such as late filing of returns. These range from R250 to R16,000 per month, depending on turnover, and continue until you rectify the issue.
2. Understatement Penalties
Charged when SARS believes you’ve under-declared income or overstated deductions. These can reach 200% of the tax shortfall, depending on the severity of the offence.
3. Late Payment Penalties
If you fail to pay tax on time, a 10% penalty applies immediately, with daily interest accruing until settlement.
4. PAYE and VAT-Related Penalties
Incorrect PAYE submissions or VAT discrepancies can trigger both financial and legal consequences, including criminal prosecution in extreme cases.
Why SARS Is Tougher Than Ever
SARS now uses automated cross-referencing and AI analytics to identify irregularities between company returns, supplier invoices, and bank data. That means even small inconsistencies can flag your business for review.
The message is clear: prevention is far cheaper than penalty management.
Common Causes of Penalties
- Submitting returns after the deadline
- Miscalculating VAT or PAYE
- Failing to declare all income
- Poor record management
- Using unregistered tax advisers
Even accidental errors can lead to penalties if SARS determines negligence rather than intent.
How to Prevent SARS Penalties
- Submit on Time
Set calendar reminders for all return due dates and confirm receipt via eFiling. - Keep Accurate Records
Maintain reconciliations for VAT, PAYE, and income tax, and store them for at least five years. - Use Qualified Practitioners
A registered tax practitioner ensures calculations, supporting documents, and SARS submissions meet all compliance requirements. - Conduct Regular Reviews
Schedule mid-year compliance reviews to catch potential errors early. - Don’t Ignore SARS Letters
Always respond within the specified timeframe. Silence can be interpreted as non-cooperation, leading to escalated penalties.
Disputing SARS Penalties
If you believe a penalty is unjustified, SARS allows for a formal objection or “Request for Remission.”
How It Works:
- Submit an objection via eFiling within 30 business days of receiving the penalty.
- Provide supporting evidence, such as proof of submission or mitigating circumstances.
- If SARS rejects your objection, you may escalate to the Tax Board or Tax Court.
Professional representation improves your chances of success, especially where interpretation of legislation is involved.
The Role of Professional Support
A registered tax practitioner can:
- Review your tax history for recurring errors
- Liaise directly with SARS on your behalf
- File objections and remission requests accurately
- Develop systems to prevent future penalties
This support saves time, stress, and unnecessary financial losses.
Conclusion: Compliance Is Always the Better Investment
SARS penalties aren’t just a cost, they’re a sign that compliance systems need attention. With stronger digital oversight from SARS in 2025, the margin for error has never been smaller.
CTV’s tax experts help businesses across South Africa prevent, manage, and dispute penalties quickly and correctly. Don’t wait for a penalty notice to act, let’s secure your compliance today.
