“…imposing administrative non-compliance penalties is to ensure the widest possible compliance with the provisions of a Tax Act … they are imposed impartially, consistently and proportionately to the seriousness and duration of the non-compliance.” (SARS) The Tax Administration Act stipulates that SARS can issue administrative penalties for outstanding tax returns. In previous years, penalties were only imposed on taxpayers with more than one tax return outstanding. Since December, due to changes in the Tax Administration Act, SARS can apply administrative penalties to taxpayers who have a single outstanding return. As a result, hundreds of thousands of South African taxpayers have received administrative penalties from SARS this year, many of them facing tax debt of tens of thousands of rands, accumulated over many years. When are penalties incurred? SARS can raise administrative penalties if a taxpayer is non-compliant in a specific area of their tax affairs, including Personal Income Tax (PIT) and Corporate Income Tax (CIT), Pay as You Earn (PAYE) or value-added tax (VAT). A percentage-based penalty is imposed when a payment is received late. To prevent a payment from being received late, the payment must be received into the SARS bank account on or before the due date. SARS also imposes fixed amount administrative non-compliance penalties for outstanding returns and/or non-compliance for PIT or CIT. These include the once off PIT penalty imposed where the taxpayer submitted a return late as from 2020 year of assessment onwards. There is also a recurring penalty for the failure to submit a return for PIT and CIT. The fixed amount penalty is based on a taxpayer’s taxable income and can range from R250 a month (where there is an assessed loss or no taxable income) up to R16,000 a month (where the taxable income exceeds R50 million) for each month that the non-compliance continues. For PIT, the recurring penalty is imposed where the taxpayer failed to submit an income tax return for years of assessment from 2007 onwards, when that person has one or more income tax returns outstanding. For CIT, the recurring penalty is imposed where the company has failed to submit an income tax return for years of assessment from 2009, where SARS has issued the company with a final demand and the company failed to submit the return within 21 business days of the final demand. As such, penalties are now applied monthly for tax returns dating back many years. Companies also face administrative penalties for PAYE. If an employer has failed to submit an EMP501 reconciliation declaration on time, an admin penalty of 1% per month over 10 months, based on the employer’s liability over 12 months, is levied. What are the costs of the penalties? Percentage-based penalties are often steep, such as the 10% late payment penalty on VAT or PAYE, or the penalty of 1% over 10 months where an EMP501 was not submitted in time. But it is the recurring penalties levied every month that really snowball. This is because SARS will keep penalising non-compliant taxpayers month…

“The importance of the ability of taxpayers to challenge the legality of actions and decisions within the tax system is internationally recognised.” (Taxpayers’ Rights: Theory, Origin and Implementation) In South Africa, taxpayers have the right to dispute tax assessments, interest, late payment penalties, and administrative penalties for various taxes, including Personal Income Tax (PIT), Corporate Income Tax (CIT), Value-Added Tax (VAT), and Pay-As-You-Earn (PAYE). This is done by submitting requests such as Request for Reason, Request for Late Submission (Condonation), Request for Remission (RFR), Notice of Objection (NOO), Notice of Appeal (NOA), and Suspension of Payment. Recent changes to the procedures to lodge an objection and appeal against an assessment or decision aim to enhance the efficiency and effectiveness of tax dispute resolution. Here are the key changes: Taxpayers now have 80 business days to file a Notice of Objection against a SARS assessment or decision, a significant increase from the previous 30-day window. Taxpayers are not obliged to wait the full 80-day period. All substantiating documentation must now be submitted within the extended 80-day objection period, making it crucial to request reasons for an assessment before objecting. Previously taxpayers were only required to list the substantiating documents.  Taxpayers can request an additional 30-day extension beyond the 80-day period for valid reasons and, in exceptional cases, an extension up to three years. Taxpayers and SARS can agree on shorter periods for dispute resolution, not just extensions as per the old rules. Taxpayers can appeal the outcome of an objection on new grounds not raised in the NOO, if it doesn't pertain to a previously unchallenged part of the assessment. Alternative Dispute Resolution (ADR) changes now require facilitators to have appropriate tax experience and to be acceptable to both parties. A senior SARS official must appoint the facilitator within 15 days of the ADR commencement. Interim ADR reports must be delivered within five days after the meeting, and final reports within 10 days following the end of ADR proceedings. SARS must now issue assessments within 45 days of a settlement being reached in a dispute and/or after receipt of the Tax Court’s decision from the Registrar. SARS must provide a statement explaining why they made an assessment and why they oppose an appeal to the tax court. SARS can now add new grounds for disallowing objections or appeals, unless it changes the assessment basis significantly or requires a new assessment. Changes to the Tax Board and Tax Court processes include the issuance of subpoenas by the Tax Board clerk or Tax Court registrar, with parties having the right to challenge these if they find them irrelevant or unreasonable. An email address is now expressly included as an ‘address for delivery’. What’s still the same? SARS must inform taxpayers of assessments, notifications or communications issued by also sending a message to the taxpayer’s last known number or email. Keep your contact details updated and check your compliance status regularly, especially when receiving emails or SMSs from SARS.               Submitting an objection or appeal does not…

7 November – Monthly Pay-As-You-Earn (PAYE) submissions and payments 29 November – Excise Duty payments 30 November – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable. Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice. © CA(SA)DotNews