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SARS is taking a firm position at the start of the 2022 individual filing season with penalty warnings for those taxpayers that fail to submit their income tax returns on time. Sanctions available to SARS are indeed punitive.

Where taxpayers fail to submit their returns timeously, SARS is now (in some instances) authorized to issue assessments of the amount due and impose further penalties for late submission. Where a taxpayer fails to submit a return, section 95 of the Tax Administration Act permits SARS to issue an assessment based on estimates compiled from information readily available to SARS. The taxpayer cannot challenge the assessment until the arrear return has been filed with SARS.

Further to the above, SARS is empowered to levy non-compliance penalties in terms of section 210 of the Act and further understatement penalties under section 222. SARS may further impose an administrative non-compliance penalty should a taxpayer fail to comply with their obligation to submit a return. The amount of the penalty is determined with reference to the taxpayer’s assessed loss or taxable income for the preceding tax year. These penalties range from R250 – R16,000 per month, leviable per month that the non-compliance continues.

SARS is equally empowered to levy understatement penalties, where the non-submission of a return has been prejudicial to SARS or the fiscus and has resulted in a shortfall of tax paid to SARS. Such shortfalls arise in circumstances where there is a difference between the amount of tax that would have been collected under a return submitted or outstanding and the amount of tax that should have been collected under the correct application of the relevant tax legislation.

The value of the understatement penalty is calculated based on the culpability of the taxpayer and ranges between 0% of the shortfall where the non-compliance is disclosed under the voluntary disclosure programme and 200% of the shortfall, where the taxpayer is guilty of intentional tax evasion.