SARS charges interest on outstanding tax from the original due date, not the date you actually pay. The prescribed interest rate is set quarterly under the Income Tax Act, and it compounds daily — which means a small shortfall can grow into a significant liability within months.
Penalties fall into two broad groups. Administrative penalties apply for non-compliance such as late or non-submission of returns, and are charged monthly under Chapter 15 of the Tax Administration Act. Percentage-based penalties apply to understatements of tax, ranging from 0% (for a bona fide inadvertent error) up to 200% for intentional tax evasion.
The good news: many penalties can be remitted, and interest can be reduced or waived where SARS accepts that there was reasonable cause and the taxpayer rectified the position promptly. A formal request for remission, supported by the right evidence, is usually the first step.
If you have received an assessment with penalties and interest, do not ignore it. The window to object or request remission is limited. Contact us early so we can assess the merits and file within the deadline.
This article is general information and not advice on your specific circumstances. Please speak to us before acting on it.