South Africa: Updated PAYE administrative penalties

The South African Revenue Service (SARS) introduced the pay-as-you-earn (PAYE) administrative penalty solution (June 2021). The interim solution provided SARS with the ability to impose PAYE administrative penalties for the failure to submit EMP501 reconciliations on time.

The PAYE administrative penalty was divided into 3 phases with the first two phases having already being implemented in June 2021 and April 2022 respectively. Phase three was implemented on 23 June 2023 and includes the following:

• Administrative penalty imposition: If the total amount of employees’ tax deducted or withheld, or which would have been deducted or withheld for the reconciliation period that the employer is required to render a return, is unknown, the Commissioner may estimate the total amount based on information readily available and impose the penalty on the amount estimated.
• Administrative penalty adjustment: When, upon determining the actual employees’ tax of the person in respect of whom the penalty was imposed as described above, it appears that the total amount of employees’ tax was incorrectly estimated, the penalty must be adjusted in accordance with the correct amount of employees’ tax with effect from the date of the imposition of the penalty.
• The penalty will be 1% for each month that the EMP501 return is outstanding and up to 10% of the total amount of employees' tax for that reconciliation period (i.e., for that year of assessment).

The effective date of the enhancement to the administrative penalty process that consists of the imposition and adjustment described above, will only be from the date of promulgation on 19 January 2022.

• If you submitted your EMP501 reconciliation for the 2022 and 2023 tax years of assessment late (i.e., after 31 May 2022 and 31 May 2023), check for the administrative penalty on your consolidated employer statement of account (EMPSA).
• A request for remission of the administrative penalty can be submitted on SARS eFiling in specific and limited circumstances. This includes first incidences of non-compliance and exceptional circumstances.
• If the circumstances do not warrant a request for remission, employers must settle the amount owed to SARS to provide the tax compliance status of the company.

Read a July 2023 report [PDF 195 KB] prepared by the KPMG member firm in South Africa