SARS Penalties on outstanding returns

Published by Peet Pieterse

March 18, 2021

A few years ago, SARS commenced the loading of monthly penalties on individual taxpayers who had overdue Income tax returns. This was later extended to companies and now also cover outstanding
PAYE returns.

A new penalty

For a number of years, the Income Tax Act made provision for penalties on outstanding EMP501 and
IRP5 submissions. SARS issued a notice that this will now be applied from the Feb 2021 returns that are
due at the end of May 2021. Whereas other administrative penalties for non-submission usually had a
fairly low value, on the EMP501 returns this can be substantial.

How much is the EMP501 penalty?

The penalty is 1% of the annual PAYE for the employer, per month that the return is overdue, up to a
maximum of 10% of the total liability (therefore 10 months). This penalty is payable by the employer. If
you have no PAYE payable for the year, in effect, there will therefore be no penalty if you are late with
the submission. However, employers should remember that although there may be no penalty
applicable, they are still in contravention of the act, and SARS has other remedies to enforce
compliance. If the problem is systemic SARS may in future, consider a minimum penalty to apply.

How can I avoid such a penalty?

Employers should ensure that they have confirmation that there return was submitted before the due
date of 31 May 2021.

What about other SARS penalties?

SARS can levy penalties on other outstanding tax returns, including Income tax returns. These penalties
have a minimum value and is a monthly penalty per return outstanding.

What if my company is dormant, deregistered, or liquidated?

If your company is dormant the requirement remains to submit the relevant tax returns before the due
date. If your company is deregistered or liquidated an application must be submitted to SARS to
deregister for tax. Until such deregistration is concluded the taxpayer is responsible to submit tax
returns, although it will be Nil returns. The Public Officer of the company can be held personally liable
for any penalties raised against the company on returns not submitted. SARS also has other remedies to
enforce compliance and the Public Officer must remember that he is personally liable to endure
compliance by the company of submitting returns.

What do I need to do?

Obtain a tax clearance certificate on a regular basis to ensure that your company is tax compliant.
Ensure your relevant tax returns are submitted on time and obtain professional assistance in this regard
if you are unsure. Where you were previously involved with companies/CC’s and these were
deregistered/liquidates confirm that they were also deregistered at SARS. Historically this was usually
not done/actioned by SARS and often now taxpayers receive penalty notices for these old entities.

At PPHC Global we can assist you to have peace of mind that your tax affairs are up to date. We’ve got
this!

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