SARS penalties and provisional tax: What you need to know
First of all, remember that you must pay half of the estimated tax liability with your first tax return. You'll pay the rest on the second tax return and if you need to 'top-up' your payment, you'll make a third payment.
In case the amount paid with the first and second returns exceed your final tax liability, you can't claim a refund on your third return. The excess will only be refunded to you once your income tax return has been submitted and assessed.
Avoid these three penalties from SARS
1. Late submission penalties (also known as administrative non-compliance penalties); and
2. Late payment penalties (also known as administrative non-compliance penalties); and
3. Penalties based on under-statement of liability.
Let's have a look at these in more detail.
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Late submission penalties: Let's look on each of these and provide you with a bit more information
1. The first one refers to the fact that if you submit your provisional tax return late, SARS will charge you with a penalty ranging from R250 to R16 000 for each month your submission is late.
2. The late payment penalties mean that paying your provisional tax after the due date, will attract a 20% penalty on the late payment. Thus if your company submits its first provisional tax return late, and only pays the first provisional tax in October, there will be a late payment penalty due of R104 000 x 20% = R20 800 (the amount, evidently, varies).
3. Penalties based on under-statement of liability refer to the fact that in case you're a tier one taxpayer, a 0% to a 200% penalty for under-estimation will automatically be levied. If you're a tier two taxpayer, you must prove to SARS that the under-estimation is a genuine error. If SARS doesn't buy it, then you'll also face a penalty of between 0% and 200%.
The under-statement penalties are listed under Section 223 of the Tax Administration Act