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Warning: Evading your Vat responsibilities will earn you these four serious penalties

by , 10 December 2014
As a Vat vendor, you have to fulfil your legal obligations. If you don't, SARS won't hesitate to penalise you.

But there are different kinds of penalties depending on what you did and how serious it was.

In fact, there are four different kinds of penalties SARS could hit you with.

Read on to find out what they are...

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If you don't fulfil your Vat responsibilities, you'll face one of these four penalties

1. Fixed amount penalties
If SARS thinks you didn't comply with the Vat Act, it'll impose a penalty based on the prescribed table of fixed penalties. You can find a copy of this table in the Practical Vat Loose Leaf Service.
It will do this no matter which obligation imposed by any tax act you don't comply with. Here are all the tax acts you need to comply with:
  • Transfer Duty Act, 1949;
  • Estate Duty Act, 1955;
  • Income Tax Act, 1962;
  • Value-Added Tax Act, 1991;
  • Tax on Retirement Funds Act, 1996;
  • Skills Development Levies Act, 1998;
  • Unemployment Insurance Contributions Act, 2002; and
  • Securities Transfer Tax Act, 2007.
2. Percentage-based penalties
If you pay any of your taxes late, SARS will impose a percentage-based penalty. This is over and above any other penalty or interest SARS already levied (Section 213 of the TAA).
The percentage of the penalty is set out in the relevant tax Act. For example, the Vat Act states that SARS must impose a 10% penalty for late Vat payment.
This penalty's only a percentage of your unpaid taxes. It doesn't include any administrative penalties in the calculation. So, for example, if you haven't paid R20 000 in output tax, SARS can charge you 10% of R20 000 as a penalty.
3. Understatement penalties
If you're guilty of paying less tax than you should, you'll pay an understatement penalty (Section 222 of the TAA). These penalties also work on a percentage basis but they increase as the severity of your understatement increases.

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By reading this letter, it will tell you how to avoid costly Vat mistakes, save you money, time and be your CEOs favourite person when you save the company R1 000s of Rands in Vat refunds this year.
4. Criminal penalties
The TAA now provides a detailed list of offences that SARS can prosecute taxpayers for (Section 234 to 236 of the TAA). You can find a list of 22 of these offences here.
If you don't comply with all the tax laws all the time, SARS will prosecute you for your non-compliance. Even for the small things.
SARS is taking a hardline approach to dealing with non-compliant and careless taxpayers. The TAA makes this clear. You won't only have to pay one of these three penalties mentioned above. You could also be further penalised with a prison sentence or another fine.
As you can see, neglecting or evading your Vat responsibilities isn't something SARS takes lightly. It will punish you and those penalties could cripple your business.
For more information on SARS penalties, check out the Practical Vat Loose Leaf Service

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