All taxpayers in South Africa are legally obligated to file their tax returns with the South African Revenue Service (SARS), and failure to comply with this requirement constitutes a criminal offence under tax law. This legal duty applies to millions of South Africans and is strictly enforced during the annual tax season.
Key Takeaways
- Filing Is Legally Required for Most Taxpayers: South Africans earning income from multiple sources, capital gains, or foreign income, even if under R500 000, are still required to file a return unless all exemption conditions are strictly met.
- Penalties for Non-Compliance Are Severe: Failure to submit a required tax return may lead to administrative penalties of up to R16 000 per month, legal action, blocked access to financial services, or even criminal prosecution.
- SARS Is Actively Monitoring and Enforcing: SARS is using advanced systems to identify non-compliance, issuing letters of demand, conducting audits, and collaborating with third parties and foreign agencies to trace undeclared income.
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SARS Intensifies Crackdown on Non-Compliant Taxpayers
Tax specialists have issued strong warnings that SARS has significantly increased its efforts to identify and act against individuals who fail to meet their tax responsibilities. The revenue authority is reportedly pursuing non-compliant taxpayers with renewed intensity and has committed to enforcing the law to its full extent. Over the past year, SARS has ramped up audits, data cross-checking, and the use of AI tools to flag suspicious activity.
Exemptions Exist, but Only for Certain Individuals
Although there are some exemptions to the requirement of submitting a tax return, these apply only to a narrow group of taxpayers. Exempt individuals typically include those whose total annual income does not exceed R500 000 or those who have already undergone the auto-assessment process through SARS systems. All other individuals are still legally required to submit their returns.
Even then, taxpayers are strongly encouraged to double-check whether they meet all the exemption criteria to avoid costly penalties.
Income Earners Must Assess Their Filing Obligations
Financial adviser Johan Werth, affiliated with Consult by Momentum, has explained that both South African residents and non-residents who have earned any form of income during the applicable tax year are obligated to file a return. This applies regardless of their country of residence, provided the income relates to South African tax obligations. Failure to file could result in complications with immigration status, travel clearance, and even renewal of business licenses.
Sources of Income That Require Tax Filing
This obligation is particularly important for individuals who receive income from more complex or multiple sources. This includes, but is not limited to, capital gains, income from foreign entities, and dividends that have not been subject to automatic withholding tax at source. Many taxpayers underestimate the complexity of declaring such income correctly, which can lead to SARS flagging their profile for audit.
Earning from More Than One Source Triggers Filing Duty
Anyone who earns money from multiple income streams, such as those who receive both a salary and rental income, is legally required to file a tax return. Similarly, provisional taxpayers who earn income that is not subject to pay-as-you-earn (PAYE) deductions are also included in this category and cannot rely on exemptions. SARS has been actively scrutinising bank accounts and third-party data to catch undeclared rental or freelance income.
The R95 750 Threshold and the Misconception About R500 000
In technical terms, taxpayers who earn more than the minimum tax threshold of R95,750 must submit a return. However, SARS offers an exemption for those earning under R500 000, provided that strict conditions are met. Werth has cautioned that many people mistakenly believe that earning under R500 000 automatically exempts them, which is not always the case.
This common misunderstanding has resulted in thousands of taxpayers receiving unexpected penalties in previous years.
Conditions for Exemption Below R500 000
The exemption from filing a return for those earning below R500 000 is subject to multiple criteria. For example, the total income must come from only one source, and this income must already have had the necessary tax deductions applied through PAYE or similar mechanisms. If any part of the income falls outside these terms, the exemption no longer applies. SARS will not hesitate to reclassify exempt taxpayers if new income sources are detected through third-party reporting.
Allowances and Foreign Services Can Disqualify Exemption
In addition, if a taxpayer has received allowances related to business travel, accommodation, or daily subsistence, the exemption does not apply. Similarly, if a person has earned or accrued any income from services rendered outside the borders of South Africa, they will still be required to file a return, regardless of whether their total earnings fall below the R500 000 limit. Cross-border income, in particular, is under the spotlight this tax season, as SARS collaborates more closely with foreign tax authorities.
Even individuals who believe they qualify for an exemption should not make assumptions. Werth advised that all taxpayers should at the very least verify their compliance status via SARS eFiling or by consulting with a qualified tax practitioner. This is a prudent step to ensure there are no outstanding obligations that could result in penalties. A quick check could save thousands of rands in penalties and potential blacklisting.
Failing to File Is a Criminal Offence
Werth emphasised that where a person is legally required to submit a tax return, failure to do so is regarded as a criminal act under South African tax law. In such cases, it is far safer to confirm one’s status than to ignore the issue, which could lead to prosecution. SARS has already prosecuted multiple cases this year, making examples of defaulters in an effort to improve national compliance levels.
Taxpayers can determine whether they are required to submit a return by reviewing any communications received from SARS or by visiting the official SARS website to use its eligibility tools or access their online profile.
SMS notifications, email alerts, or correspondence through the SARS app may all contain important filing instructions that must not be ignored.
Penalties and Consequences for Not Filing
Not filing a return, even in situations where SARS owes a refund to the taxpayer, can result in substantial financial consequences. The revenue authority is authorised to apply monthly administrative penalties of up to R16 000, initiate legal action against the taxpayer, and block access to crucial services such as obtaining a home loan or receiving tax clearance for emigration.
These penalties can accumulate rapidly, leaving some taxpayers with a debt far higher than the initial tax liability.
SARS Letters of Demand Should Not Be Ignored
Individuals who have failed to file in prior years may receive a formal letter of demand from SARS. This document serves as the final notice and must be taken seriously. Ignoring this correspondence can lead to more severe outcomes, such as civil judgement being taken against the taxpayer or even criminal proceedings being initiated. Once the letter of demand is issued, taxpayers have very little room to negotiate or request leniency.
Should SARS decide to audit an individual or issue a request for verification or supporting documentation, the taxpayer may have as little as three working days to respond. Failure to do so may lead to prosecution, especially in cases where SARS suspects intentional avoidance. In many instances, audits are triggered by inconsistencies in third-party data and banking records, which SARS now has more access to than ever before.
Taxpayers Expected to Pay Within Ten Business Days
Once SARS has determined the amount owed after reviewing or auditing the taxpayer’s records, the full outstanding balance must be settled within ten business days from the date that the letter of demand is issued. Failure to do so may result in the taxpayer’s account being handed over to debt recovery services or being flagged at credit bureaus.
Werth encouraged taxpayers to take control of their tax responsibilities immediately. Delaying action or avoiding SARS will only increase the risk of penalties and further complications. Reaching out early could provide opportunities for payment arrangements or clarification that avoids unnecessary legal action.
Common Filing Mistakes to Avoid
He warned that common errors, such as failing to read SARS communications, missing deadlines, submitting incomplete documentation, or neglecting to claim allowable deductions, can all have negative consequences and should be avoided.
Even minor oversights, such as missing a medical aid certificate or forgetting to declare interest income, can result in SARS flagging your return for review.
Maintain Accurate Records to Avoid Risk During Audit
Werth highlighted that poor recordkeeping remains a major issue for many taxpayers. He explained that failing to retain proof of expenses such as receipts, mileage logs, or official tax certificates increases the risk of problems during audits. He recommended that all such documentation be stored securely in digital format for a minimum of five years, in line with SARS requirements. Cloud storage and digital folders should be part of every taxpayer’s toolkit to stay prepared for audits or future queries.
Conclusion
With SARS intensifying its enforcement efforts, South African taxpayers must not assume exemption without confirming their status. Even those earning under the R500 000 threshold must meet specific conditions to avoid filing. Ignoring communication, failing to declare income properly, or keeping poor records can result in costly penalties and legal consequences. Proactive management, proper documentation, and regular checks on SARS eFiling are essential to staying compliant and avoiding unnecessary trouble.
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