Reinert van Rensburg, a tax expert and attorney at Lead Group, has revealed that the South African Revenue Service (SARS) has become more stringent in their enforcement of penalties. This move has resulted in those who have not submitted their tax returns becoming the target of the tax authority. SARS is currently in the process of imposing penalties for late submissions, as warned in their latest Tax Practitioner Newsletter for January/February 2023. The group advised taxpayers and service providers to take immediate action if they receive a notice for late or non-submission of one or more Income Tax Returns. To avoid penalties, they recommended submitting outstanding returns as soon as possible.
At the end of the 2021 filing season, SARS had announced that it would levy penalties for the late submission of return if the 2021 return was not submitted on time. According to Van Rensburg, this has resulted in a new general rule that a penalty will be imposed immediately if a taxpayer fails to submit a return, based on the one outstanding or late return. Previously, SARS only imposed penalties for the late submission of returns if two or more returns were outstanding. This new rule applies to the 2021 tax return going forward, however, it does not apply to previous returns.
The amount of the penalty is dependent on the taxable income of the tax assessment in question, as determined by the penalty table.
The penalty is payable every month that the amount is outstanding, up to a maximum of 35 months of non-compliance. Van Rensburg emphasized that individual taxpayers who do not submit their tax returns will have to pay penalties to SARS. SARS uses information from third-party sources, such as employers, banks, financial institutions, and medical aids, to predetermine a taxpayer’s taxable income and tax liability, which must be confirmed by the taxpayer themselves and submitted to SARS. Failure to do so will result in penalties.
South Africans working abroad who are receiving foreign income are taxable domestically if they are a resident. However, if the foreign income will result in a tax liability of more than R30,000 after foreign tax credits and exemptions are applied, the expatriate taxpayer must register as a provisional taxpayer. Failure to include the foreign income in provisional tax returns could result in understatement penalties of up to 200% of the shortfall during the annual return submission, according to Van Rensburg.
For South Africans to be considered a non-resident and divorce themselves from the South African taxable base, they must be a non-resident of the country and have all tax returns up to date and all outstanding taxes or penalties paid. This can pose a problem for South Africans who left the country several years ago and now need to formalize their non-residence with SARS. Van Rensburg pointed out that these taxpayers will have to submit all outstanding tax returns to SARS, which will be subject to the new penalty rules and result in several penalties being imposed.