Africa-Press – South-Africa. SARS is cracking down on historical payroll tax non-compliance, and many employers face severe penalties over past mistakes.
Tanya Tosen, Tax and Remuneration Specialist at Tax Consulting SA, said employers have historically taken a head-in-the-sand approach to payroll, particularly when it comes to the taxation of employee benefits.
However, she warned that any employers who are not 100% confident that every fringe benefit on their payroll is correctly taxed should act now.
This is because the South African Revenue Service (SARS) is clamping down on all forms of tax non-compliance.
“Whether through misunderstanding, oversight, or deliberate omission, certain fringe benefits may have been left off the radar of PAYE, UIF, and Skills Development Levy (SDL) calculations for years,” Tosen said.
“The uncomfortable truth is that the longer non-compliance goes unaddressed, the greater the financial and reputational risks for the employer.”
SARS has significantly enhanced its audit capabilities in the last few years, leveraging third-party data, system integrations, and AI-powered risk analysis to detect non-compliance.
A once-silent oversight by employers can quickly become a red-flag trigger for a payroll audit, especially when benefits like travel allowances, fuel cards, or company cars are involved.
Tosen stressed that when SARS does come knocking, the implications are far more severe than simply “correcting an error”.
Penalties of up to 200% may be imposed in cases of intentional tax evasion, along with interest accruing from the first point of non-compliance and not just from when the issue was discovered.
“Rather than wait for SARS to uncover your non-compliance during an audit, the Voluntary Disclosure Programme (VDP) is the only official mechanism available to come clean and potentially limit your exposure,” Tosen said.
It is important to note that the VDP only applies when a taxpayer approaches SARS voluntarily. Taxpayers should not attempt this process themselves.
“A VDP must be carefully prepared, fully substantiated, and submitted with precision. A weak or incomplete application may be rejected or expose you to further risk,” she said.
Misconceptions cost companies
Tosen explained that many employers still operate under dangerous misconceptions when fixing historical payroll irregularities.
They think they’re safe if they simply correct the issue going forward. However, Tosen warned that this is not the case. “SARS expects a remedy from the first year of non-compliance, not just from the current tax period.”
Many employers also have the misguided belief that they can fix one wage item through a Voluntary Disclosure.
“Your VDP submission must be complete and accurate, covering all material errors related to the relevant tax type. Piecemeal disclosures will not be entertained and could disqualify your application.”
Finally, employers may think they can always apply for VDP again if needed. Tosen explained that taxpayers may only submit a VDP application for a particular tax type once every five years, though. “It goes without saying, then, that this one shot must be accurate and thorough.”
SARS explained that the VDP’s purpose is to enhance voluntary compliance, which will enhance tax compliance and make the best use of SARS resources.
“It aims to encourage taxpayers to come forward on a voluntary basis to regularise their tax affairs with SARS and avoid the imposition of understatement penalties and administrative penalties,” the taxman said.
VDP relief is available for all taxes administered by SARS, but excludes duties and levies charged in terms of the Customs and Excise Act. Benefits of the VDP include:
Certain penalties may be waived, especially if there was no intentional tax evasion.
Interest charges still apply, but are often more manageable than lump-sum penalty assessments.
It demonstrates proactive behaviour and corporate accountability, which SARS views favourably.
Tosen said that another critical, often overlooked aspect is the personal liability of directors and prescribed officers.
SARS may pursue personal accountability for severe or repeated non-compliance where it believes gross negligence or wilful evasion occurred. “Payroll tax is not just a company issue; it can become a personal one,” she said.
In the current climate, where SARS actively seeks to increase collections and crack down on non-compliant employers, she stressed that a wait-and-see approach is not advisable.
“Rather than waiting to become the subject of an audit or a public enforcement action, we strongly encourage employers to engage with qualified tax attorneys and payroll specialists,” Tosen said.
These experts can conduct a compliance review, quantify the exposure, and facilitate a tailored VDP submission where appropriate.
“Payroll non-compliance may seem invisible now, but eventually it will come to light,” Tosen added. “When it does, it is far better to be in control of the process than at the mercy of a SARS audit.”
“If you suspect historical payroll irregularities, do not ignore them. There is a legal, credible way to correct past mistakes and protect your business. That starts with a properly executed Voluntary Disclosure, guided by professionals.”
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