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Comply with Vat Act to avoid these four SARS penalties

by , 20 May 2015
If there's one golden rule you should follow in business, it's this: Make sure you comply with the Vat Act if you don't want SARS to charge you penalties and interest.

In practice, if you don't comply with the Vat Act there are four penalties SARS can charge you for.

Here's what they are...

The four types of penalties SARS charges Vat non-compliers

1. Fixed amount administrative/non-compliance penalties

This means that if SARS thinks you didn't comply with the Vat Act, it can impose a penalty. SARS will base the penalty on the prescribed table of fixed penalties (Section 210 and 211 of the TAA).

How can you avoid this?

Make sure you comply with all your Vat administrative obligations.

2. Percentage based penalty

If you pay any of the taxes imposed under any tax act late, SARS will impose a percentage-based penalty. This is over and above any other penalty or interest that's already been levied (Section 213 of the TAA).

3. Understatement penalty

In case you're guilty of paying less tax than you should've, you'll have to pay an understatement penalty in addition to the tax payable (Section 222 of the TAA).

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4. Criminal penalties.

If you don't comply with all the tax laws, all the time, SARS will prosecute you for your noncompliance. Even for the small things.

Pay attention to the fact that if you don't submit a return, you can potentially be liable for all four types of penalties plus interest if you don't pay by the effective date.

Use this tip: Don't accept penalties and additional tax unless SARS can prove you were cheating!

Keep in mind that there are several ways to avoid SARS Vat Penalties.

For instance, you should  register for Vat when you have to – i.e. when you your turnover is more than R1 million in any 12-month period.

You should also inform SARS when your postal, banking or representative's details change and keep the proof.

Another possibility is by submitting your Vat returns on time and assisting SARS with their information gathering.

At the end of the day, if you manage your Vat liability properly, you don't have to worry about being charged. Make sure you comply and so your business will thrive and not encounter financial issues and obstacles!

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