Non-filing is one of SARS's top enforcement priorities. With the SARS eFiling system now integrated with third-party data sources (banks, employers, medical aids, and more), SARS often knows more about your income than you think. Ignoring your filing obligation is never a safe strategy — and the consequences escalate quickly.
Step 1: Automatic Penalties for Non-Filing
Under the Tax Administration Act (TAA), SARS imposes a fixed automatic administrative penalty for each month a return is outstanding. The penalty amount is based on taxable income from the preceding year and ranges from R250 per month (for lower income brackets) to R16,000 per month for higher earners.
Critically, these penalties accumulate every month the return remains unfiled — for up to 35 months. That means a single missed return can generate penalties of up to R560,000 before SARS even takes further action. Unlike many fees, these administrative penalties are not automatically waived when you eventually file.
Step 2: Estimated Assessments
If SARS cannot obtain a return after issuing a notice, they have the power under Section 95 of the TAA to issue a "default assessment" — an estimate of what they think you owe. SARS will use whatever third-party data they have access to, and they are not obliged to be conservative.
Once a default assessment is issued, the amount becomes immediately payable. Interest runs from the date the tax was originally due (not from the date of assessment). You can object to the assessment, but the burden is on you to provide the correct return and supporting information within the prescribed timeframes.
Step 3: Interest on Unpaid Tax
In addition to the fixed penalties, any tax that is unpaid accrues interest under Section 187 of the TAA. The interest rate is set by the Minister of Finance and is currently 10.75% per annum (effective September 2024). This interest is calculated from the original due date and is not deductible as a business expense.
It's worth noting that interest charged by SARS can exceed the original penalty in cases of prolonged non-compliance, particularly for VAT or PAYE accounts where large monthly amounts were involved.
Step 4: Collection by SARS
SARS has extraordinary collection powers compared to most creditors. Under the TAA, SARS can:
- Issue a Third Party Appointment (TPA): SARS can instruct your bank to pay outstanding amounts directly from your account without a court order. They can also appoint your debtors to pay SARS instead of you.
- Register a tax lien: SARS can register a security interest over your assets, preventing you from selling or transferring them.
- Attach and sell assets: SARS can obtain a civil judgment and instruct the sheriff to attach and sell your property to satisfy the tax debt.
These collection steps can happen relatively quickly once a debt is established. Most taxpayers who find themselves facing a TPA from SARS wish they had addressed the issue much earlier.
Step 5: Criminal Prosecution
While SARS often prefers to resolve matters administratively, the TAA does provide for criminal prosecution in serious cases. Deliberate non-filing, tax evasion, and fraud are all criminal offences. Conviction can result in imprisonment of up to two years (for general non-compliance) or up to five years for more serious offences. Directors of companies can be held personally liable.
SARS's criminal division (with SAPS) has become increasingly active in prosecuting high-profile non-compliance cases as a deterrent.
What If You're Already Behind?
The good news is that SARS generally prefers voluntary compliance over enforcement. If you are behind on your filings, the worst thing you can do is continue to ignore the situation. The best approach is:
- Get your records in order — compile all income, expense, and VAT documentation for the outstanding periods.
- File all outstanding returns as soon as possible — each month you delay adds further penalties.
- Apply for penalty remission — Section 213 of the TAA allows SARS to remit fixed administrative penalties if there is a reasonable cause for the non-compliance and the taxpayer has since filed all outstanding returns.
- Apply for a payment arrangement — if you cannot pay the full amount immediately, SARS will enter into a payment plan if you approach them proactively.
If your non-compliance involved deliberate under-disclosure or fraud, the VDP allows you to come forward voluntarily in exchange for reduced penalties and protection from criminal prosecution. It must be applied for before SARS opens a formal audit or investigation.
Prevention Is Infinitely Cheaper Than the Cure
The penalties, interest, and collection costs outlined above can accumulate to multiples of the original tax liability. A tax professional who ensures your returns are filed on time costs a fraction of the combined penalties and interest that result from non-compliance.
SGBS Group handles SARS submissions for businesses across South Africa — from VAT and PAYE to provisional tax and corporate income tax. If you're behind or unsure about your compliance status, contact us for a confidential review.