Monique Vanek of Moneyweb Tax reports for TAXtalk South Africa that some non-compliant taxpayers could be in for an unfortunate surprise.

You could pay up to R16,000 for non-compliance.

The news may not be good for those who failed to get their tax returns in by the 5 February deadline, for companies that fail to provide details of an employee to the South African Revenue Service (SARS), or for those who have tried to avoid paying tax. SARS is homing in on such indiscretions, it has already uncovered 400,000 South Africans who were not paying taxes after employers submitted their PAYE data to SARS. It has also gazetted regulations prescribing stiff penalties, as it viewed the previous penalties as too light. Interestingly, notes The South African Institute of Chartered Accountants, (SAICA), the penalties are discretionary.

According to the Income Tax Act No. 58 of 1962 Section 75B, penalties can now be awarded for the:

(a) failure to register as a taxpayer as required by the Act;

(b) failure to inform the commissioner of a change in address;

(c) failure by a company to appoint a public officer, appoint a place for service or delivery of notices and documents, keep the office [position] of public officer constantly filled, maintain a place for the service or delivery of notices, or to notify the Commissioner of any change of public officer or of the place for the service or delivery of notices;

(d) failure to submit a return or other related documents/information;

(e) failure to furnish, produce or make available information, documents or things;

(f) failure to reply to or answer a question put to a person when required;

(g) failure to attend and give evidence as and when required;

(h) failure by an employer to notify SARS of a change of address or the fact of having ceased to be an employer as and when required;

(i) failure by an employer to submit a monthly declaration of employees' tax as and when required;

(j) failure by an employer to provide details of an employee;

(k) failure to deliver an employees' tax certificate to one or more employees or former employee;

(l) delivery by an employer of an employees' tax certificate prior to first rendering an employees' tax return;

(m) failure by a provisional taxpayer, who is liable for the payment of normal tax, to submit an estimate of taxable income as and when required; or

(n) any other non-compliance with an obligation imposed under the Act.

Penalty Rates

Penalties will be based on the taxpayer's taxable income for the year of assessment immediately prior to the year in which the offence took place. The penalties, which became effective on 1 January 2009, are as follows:

(i) Assessed loss - Penalty R250

(ii) R0-R250,000 - Penalty R250

(iii) R250,001-R500,000 - Penalty R500

(iv) R500,001-R1,000,000 - Penalty R1,000

(v) R1,000,001-R5,000,000 - Penalty R2,000

(vi) R5,000,001-R10,000,000 - Penalty R4,000

(vii) R10,000,001 - R50,000,000 - Penalty R8,000

(viii) Above R50,000,000 - Penalty R16,000

Table compliments of SAICA

SAICA has however requested that the effective date of these penalties be postponed until later in the year.

Further Information

Previously taxpayers who failed to submit their income tax returns on time received a R300 penalty for late submission. This, says Deborah Tickle, a tax partner at KPMG, used to increment at R300 a time, with each successive late submission, to a maximum penalty of R1,800. SAICA mentions that these latest penalties are separate from the percentage-based penalties that might also apply in certain instances. For example, it says, a 10% penalty for late payment of provisional tax may be levied.

Also worth noting is that the penalties don't stop there: they can escalate each month, or part thereof, if the person continues not to comply within 30 days of the date of non-compliance.

“Once imposed for the first time, the penalty may be triggered for persistent non-compliance, for up to an additional 35 months (or 47 months, should SARS be unable to deliver the penalty assessment due to a failure to advise SARS of a current address). A monthly penalty of R250 will apply for the non-submission of returns where a taxpayer has an assessed loss, or up to R250,000 of taxable income. If you earn between R500,000 and R1M of taxable income, you would be in for a R1,000 monthly penalty. Any entity having in excess of R50M taxable income in the year would be subject to the maximum penalty of R16,000 per month,” says Tickle.

In the case where you have more than just your current income tax return outstanding there is a grace period until 1 April 2009. Thereafter, should the return still be outstanding, notes Tickle, “the fixed penalty may be imposed, and for every month thereafter, up to 35 months (or 47 months, in the absence of a current contact address), until such time as the outstanding tax return is submitted”.

Companies

Listed companies, and companies whose gross income exceeds R500M, will be liable for a penalty of at least R8,000 per month for tax non-compliance, reckons Tickle. “Any company which is part of the same group of such companies will also be liable for this minimum penalty,” says Tickle.

The above article was produced by Monique Vanek of Moneyweb Tax, and is reproduced with the kind permission of TaxTalk, South Africa's leading tax publication.

Article Added Monday, 04 May 2009 | 3878 Hits

Your attention is drawn to the disclaimer on this site, which applies to the content in this section.