How SARS Calculates Penalties and Interest: The Complete Formula Guide
Detailed formulas and worked examples for every SARS penalty type. See exactly how penalties and interest compound together with real-number scenarios.
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How SARS Calculates Each Penalty Type
SARS uses specific formulas for each penalty type. Understanding these formulas helps you verify that SARS has charged the correct amount — and identify opportunities for remission. Below is a comprehensive breakdown with worked examples.
Formula 1: ANC Penalty
The administrative non-compliance penalty is a fixed monthly amount based on taxable income:
ANC Penalty = Monthly Amount × Number of Months Outstanding
Example: A taxpayer earning R750,000 is 10 months late filing their ITR12.
- Income bracket: R500,001–R1,000,000 → Monthly penalty: R1,000
- Total penalty: R1,000 × 10 = R10,000
Formula 2: Late Payment Penalty
A once-off penalty applied the day after the payment due date:
Late Payment Penalty = Tax Owing × 10%
Example: A taxpayer owes R120,000 in income tax and pays 3 months late.
- Penalty: R120,000 × 10% = R12,000 (charged once, regardless of how late)
Formula 3: Interest on Late Payment
Interest accrues daily at the prescribed rate:
Daily Interest = (Outstanding Amount × Annual Rate) ÷ 365
Example: R120,000 outstanding for 90 days at 11.25%:
- Daily interest: (R120,000 × 11.25%) ÷ 365 = R36.99/day
- Total interest (90 days): R36.99 × 90 = R3,329
Formula 4: PAYE/VAT Late Submission Penalty
A percentage-based penalty that accumulates monthly:
Monthly Penalty = Tax Liability × 10%
Total = Monthly Penalty × Months Late (capped at 20 months)
Example: PAYE liability of R80,000, filed 5 months late:
- Monthly penalty: R80,000 × 10% = R8,000
- Total penalty: R8,000 × 5 = R40,000
Formula 5: Understatement Penalty
Based on the tax shortfall and the behaviour classification:
Understatement Penalty = Tax Shortfall × Penalty Rate
Example: A taxpayer understated income by R200,000, resulting in a tax shortfall of R90,000. Behaviour: gross negligence.
- Standard penalty: R90,000 × 75% = R67,500
- With VDP: R90,000 × 35% = R31,500 (saving R36,000)
Combined Scenario: Total Cost of Non-Compliance
Here's a realistic scenario showing how all penalties combine. A taxpayer earning R800,000 owes R50,000 in tax, files 12 months late:
| Component | Formula | Amount |
|---|---|---|
| ANC penalty | R1,000 × 12 months | R12,000 |
| Late payment penalty | R50,000 × 10% | R5,000 |
| Interest (12 months) | R50,000 × 11.25% | R5,625 |
| Total penalties + interest | R22,625 | |
| As % of original tax | 45.3% |
Non-compliance added nearly 50% to this taxpayer's bill. Use our free calculators to work out your specific numbers.
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