With advance tax, you can pay your income tax in bits during the year instead of all at once. It is non-permanent, grounded on what you will receive for the year.
You must pay advance tax if you have earnings not from a salary, like from a business, a rental, an interest, a dividend, a capital gain, etc.. The same goes if you have a salary from an employer that does not pay employees tax, like a foreign company or an embassy.
Based on your expected income, you must pay advance tax twice a year, by 31 August and 28 February. You can also pay a third time by 30 September, after the year is over but before SARS checks.
You may get fined or charged interest if you pay too late or too little. This article explains the fines and interest, the penalty code, the late and self-assessment tax penalty, and how to see and pay your SARS penalty.
Penalty on non-payment of advance tax
SARS will fine you if you don’t pay advance tax on time or pay too little. The fine is a percentage of the gap between the normal tax you owe and the advance tax you paid for the year.
The fine rate for not paying advance tax is 10% unless you can show that you did your best to estimate your taxable income and did not understate it on purpose or by mistake. Then, the fine rate may be lowered to 20% of the basic fine, which is 2%.
You have to clear the fine for not forwarding advance tax when SARS examines you, and you also have to discharge interest at the highlighted rate from the analysis date until the payment date.
For instance, if you owe R500 000 in standard tariff for the year and paid R400 000 in advance tax, the penalty for not clearing advance tax is 10 percent of R100 000, which is R10 000. If you show that you estimated your taxable income seriously, the fine may be lowered to 2% of R100 000, which is R2 000.
What is the penalty code in advance tax?
Penalty code in advance tax is a code that is used by SARS to identify the type and the reason for the penalty that is levied on the taxpayer for non-compliance with the advance tax requirements. The penalty code is indicated on the assessment notice issued by SARS to the taxpayer.
The penalty code in advance tax consists of two digits, which represent the following:
1. The first number denotes the kind of penalty, which can be either:
- for a fixed figure penalty, which is a fine that is levied for the failure to forward a return or a declaration or to register as a taxpayer;
- for a percentage-linked penalty, which is a fine that is charged for the underpayment or the late forwarding of tax, or the understatement of earnings or tax;
- for a penalty for failing to adhere to an obligation set by the Tax Administration Act, such as failing to store records, give info, appear on interviews, etc.
2. The second figure represents the purpose of the penalty, which can be either:
- For the failure to submit a return or a declaration;
- for the negligence to enroll as a taxpayer;
- for the underpayment of advance tax;
- for the late payment of advance tax;
- for the understatement of income or tax;
- for the failure to comply with an obligation imposed by the Tax Administration Act.
What is the penalty for late payments to SARS?
SARS doesn’t like it when you pay your tax debts late or too little. They will slap you with a fine that adds to your unpaid tax debt and interest.
The fine is a tenth of your unpaid tax debt unless you can show that you had a valid excuse for paying late and you sorted it out quickly. Then SARS may be nice and lower or cancel the fine.
You must cough up the fine and interest when SARS asks you to.
What is the penalty for self-assessment tax?
SARS will penalize you for self-assessment tax if you submit a wrong or late tax return. You fill out this return, not SARS, to declare your income and tax for the year.
The penalty is grounded on the difference between the tariff you forwarded and the tariff SARS determined. It is typically 20 percent of the difference, but it can be 5 percent if you prove that you didn’t cheat or respond carelessly.
You have to pay the penalty when SARS assesses your tax and tells you the amount. You must also clear interest on the fine from the assessment until the clearance date.
How do I check my SARS penalty?
You can check your SARS penalty by using one of the following ways:
- -Log in to your eFiling profile at www.sarsefiling.co.za and view your statement of account, which shows your tax liability, payments, penalties, and interest;
- Call the SARS Contact Centre on 0800 00 7277 and provide your tax reference number and identity number;
- Visit your closed SARS branch/office and ask for a statement of account or a fine notice. Book an appointment and carry your identity doc and proof of address.
How do I pay SARS penalties?
You can pay SARS penalties by using one of the following ways:
- Apply the e-payment choice on eFiling, which lets you clear your penalties straight from your bank to SARS;
- Utilize the EFT choice, which lets you clear your penalties from your bank to SARS using the SARS payment reference digits;
- Use the debit order option, which allows you to authorize SARS to deduct your penalties from your bank account every month;
- Use the cash or cheque option, allowing you to pay your penalties at any SARS branch, office, or authorized bank. Remember to bring your statement of account or penalty notice as proof of payment.
