Tax Implications of Non-Submission of Tax Returns in South Africa

By | April 28, 2023

Submitting a tax return is an important responsibility for every taxpayer. It allows the South African Revenue Service (SARS) to assess and verify the taxpayer’s income, expenses, and deductions. 

Failing to submit a tax return can result in severe consequences for the taxpayer. 

In this article, we will examine the penalties and fines associated with non-submission of tax returns, as well as the legal action that SARS may take.

Penalties and Fines for Non-Submission

When a taxpayer fails to submit a tax return, SARS will issue a penalty. The penalty amount will depend on the taxpayer’s taxable income and the number of months that have passed since the due date for submission. 

The penalty will increase for every month that the taxpayer fails to submit their tax return, up to a maximum of 35% of the taxpayer’s taxable income.

Legal Action

If a taxpayer continues to fail to submit their tax return, SARS may take legal action. This can include obtaining a court order to force the taxpayer to submit their tax return, as well as the seizure of the taxpayer’s assets. 

In extreme cases, the taxpayer may face criminal charges, which can result in imprisonment.

Impact on Tax Clearance Certificate

A tax clearance certificate is a document issued by SARS that verifies that a taxpayer’s tax affairs are in order. It is often required when applying for tenders, contracts, or loans. 

If a taxpayer fails to submit their tax return, they will not be able to obtain a tax clearance certificate. This can have significant implications for their business and financial affairs.

Impact on Refunds

If a taxpayer is entitled to a tax refund but fails to submit their tax return, they will not receive their refund. 

This can be particularly problematic if the taxpayer is relying on the refund to pay bills or expenses.

Consequences for Employers

Employers are required to submit their employees’ tax returns on their behalf. If an employer fails to do so, they may face penalties and fines.

Additionally, the employer may be held liable for any unpaid taxes that should have been deducted from their employees’ salaries.

Reasons for Non-Submission of Tax Returns

There are several reasons why a taxpayer may fail to submit their tax return. Some common reasons include forgetfulness, lack of knowledge about tax requirements, and fear of owing money to SARS. 

Others may intentionally avoid submitting their tax return in an attempt to evade taxes. 

It is important for taxpayers to understand the consequences of non-submission and to take steps to ensure that they comply with tax requirements.

Options for Late Submission of Tax Returns

If a taxpayer misses the deadline for submitting their tax return, they may still be able to submit it late. SARS allows for late submissions, but penalties and fines may apply. 

Taxpayers can also apply for an extension to the submission deadline in certain circumstances. 

It is important for taxpayers to take action as soon as possible if they have missed the deadline to avoid further penalties and legal action.

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