Bad news for individuals with outstanding income tax returns
09 December 2021
Individuals who are late in filing their 2021 income tax return will suffer the imposition of penalties for each month, or part thereof, that the return remains outstanding after 1 January 2022. The quantum of the monthly penalty will vary, depending on the level of the individuals’ taxable income in the preceding year of assessment. Section 211 of the Tax Administration Act contains a table that sets out various bands of taxable income and the amount of the monthly penalty that applies to each band.
As an example, if the individual’s taxable income in the preceding year of assessment fell into the band between R1 million and R5 million, the penalty will be R2 000 per month or part thereof. If SARS is in possession of the current address of the person and able to deliver the penalty assessment, the monthly penalty may be applied up to a maximum of 35 months that the income tax return remains outstanding from the date SARS assesses the penalty. On the other hand, if SARS is not in possession of the current address of the person and is unable to deliver the penalty assessment, the monthly penalty is imposed from the date of the non-compliance and may be applied up to a maximum of 47 months from the date of the non-compliance.
If an individual has two or more outstanding income tax returns relating to the 2007 up to the 2020 years of assessment, then the monthly penalty regime above already applies and will continue until 1 December 2022. With effect from 1 December 2022, only one or more outstanding income tax returns relating to the 2007 up to the 2020 years of assessment will be required to trigger the imposition of the penalties. Also, as already discussed, only one or more outstanding income tax returns at 1 January 2022 relating to the 2021 and subsequent years of assessment will be required to trigger the imposition of the penalties.
The new categories of incidences of non-compliance subject to the monthly penalties were published in the Government Gazette on 26 November 2021 (Government Notice No. 45540). This Government Notice replaces Government Notices Nos. 790 and 1461. Somewhat confusingly, Government Notice No. 1461 was issued recently and contained an effective date of 1 December 2021. Government Notice No. 45540 therefore moves out the effective date for the above categories of non-compliance by one month to 1 January 2022.
There are very limited circumstances in which the above penalties may be remitted by SARS, so it is particularly important that individuals ensure that their income tax returns are submitted by the due date and also, in order to prevent the imposition of understatement penalties, that returns are completed correctly.