Nothing grows a small tax problem into a big one faster than SARS penalties and interest. They’re separate charges, calculated differently, and both can be avoided or reduced if you act early. Here’s what SARS can charge and what to do if you’ve been hit.
The three charges, in plain terms
- Late-filing (administrative) penalty — a fixed rand amount for missing a filing deadline.
- Understatement penalty — a percentage determined by the statutory behaviour and disclosure table; there is no universal 25% minimum.
- Interest — charged on outstanding tax that isn’t paid by the due date.
These stack. You can owe a late-filing penalty and interest on the unpaid tax and an understatement penalty if the amount itself was wrong.
Late-filing penalties
For covered outstanding returns, the fixed administrative penalty is based on taxable income, not a simple first-offence ladder. SARS publishes a range of R250 to R16,000 per month while non-compliance continues. Read the AP34 notice for the return period, amount and corrective action. Submitting the outstanding return helps stop recurring penalties but does not itself cancel amounts already imposed.
The important practical rule: file even if you can’t pay. A return filed on time with an amount owing triggers interest and a payment arrangement conversation — but filing late triggers a penalty and interest. Filing late is always worse.
Understatement penalties
If SARS determines you understated your tax, the penalty depends on your behaviour:
- Substantial understatement (a large amount) — a percentage on a sliding scale.
- No reasonable grounds — higher.
- Gross negligence — higher still.
- Intentional tax evasion — the maximum, up to 200%.
The difference between “made a mistake” and “intentional evasion” is enormous, which is why documentation matters. If you claimed a deduction you can’t support, that’s very different from concealing income.
Interest
SARS charges interest on any tax not paid by its due date. The rate is linked to the official rate set out in the Tax Administration Act and changes periodically — in recent years it has been around 9% to 11% per year, but always check the current SARS figure because it’s amended regularly.
Interest depends on the tax type, statutory starting date and applicable rate. Refund interest has its own conditions and may use a different rate; a delayed refund does not automatically earn the same interest SARS charges on tax debt. Check the assessment and SARS’s current interest tables before estimating a balance.
What to do if you owe SARS
- File everything outstanding immediately — you can’t fix a problem SARS doesn’t yet see in your records.
- Check whether the penalty qualifies for remission — SARS can remit late-filing penalties if you have a reasonable excuse and no prior non-compliance, and can reduce understatement penalties where you made a genuine, non-reckless error.
- Request a payment arrangement if you cannot settle the debt. Provide the information SARS requests and confirm written acceptance, instalment dates and continuing interest. An application does not guarantee approval or suspend collection by itself.
- Keep evidence — reasonable grounds and prior compliance are what remission decisions hinge on.
The most common mistakes to avoid
- Ignoring a first penalty — it escalates into repeated non-compliance, which is much harder to reverse.
- Filing late to avoid payment — see above: never worth it.
- Fixing an error by filing nothing — if a return is wrong, file a correction via eFiling, don’t skip the return.
Where to verify
- SARS — Administrative penalties — notices, recurring charges and remission requests.
- SARS — Disputes — choose the process that applies to your notice rather than assuming a request suspends payment.
For the bigger picture, read how PAYE works and how to read your IRP5.