VAT is one of the most heavily enforced taxes SARS administers — and one of the easiest to get penalised on. A single late VAT201 submission or payment can trigger an immediate 10% penalty, on top of daily-compounding interest, even if the mistake was genuinely unintentional.
Many business owners only discover how these penalties work after receiving one. Understanding the rules upfront — what triggers a VAT penalty, how much it actually costs, and how to get one reduced or waived — can save your business thousands of Rands a year.
What is the penalty for late VAT payment in South Africa?
Under Section 39 of the VAT Act, SARS imposes an immediate 10% penalty on any VAT amount not paid by the due date, in addition to interest calculated daily at the prescribed rate — currently 10.25% per annum as of 2 March 2026.
This penalty applies whether the return itself was late, the payment was late, or both. It’s charged on the full outstanding VAT amount, not just the days it was late — so even paying one day after the deadline triggers the full 10%.
How Many Types of VAT Penalties Are There?
SARS can apply more than one penalty type to the same VAT liability, and each is governed by a different section of the Tax Administration Act. It’s important to know which one you’re dealing with, because the process for requesting a waiver differs for each.
| Penalty Type | Legal Basis | Typical Amount | When It Applies |
|---|---|---|---|
| Late payment penalty | Section 39, VAT Act / Section 213, TAA | 10% of unpaid VAT | Payment received after the due date |
| Interest on unpaid VAT | Section 39(1), VAT Act | 10.25% p.a., compounded daily | Runs continuously until the debt is settled |
| Administrative non-compliance penalty | Section 210, TAA | R250 – R16,000 per month | Outstanding VAT201 returns, recurring monthly until resolved |
| Understatement penalty | Chapter 16, TAA | 5% – 200% of the shortfall | Incorrect, understated, or fraudulently reported VAT |
Note the administrative non-compliance penalty in particular: it isn’t a once-off fine. It recurs every month the return stays outstanding, which is how a missed VAT201 can snowball into a five-figure liability within a year.
Can VAT Penalties Be Waived?
Yes — but only through the correct process, and only in specific circumstances. A common misunderstanding is that a penalty can be objected to directly. In fact, you must first submit a request for remission; only if that request is denied can you formally object to SARS’s refusal to waive it.
SARS must waive a penalty in two situations:
- Where there was a bona fide inadvertent error — a genuine, good-faith mistake rather than negligence
- Where the understatement is substantial (over R1 million or 5% of the correct tax amount) and the taxpayer’s position is supported by a formal opinion from a registered tax practitioner
Outside of these, remission is discretionary. A well-documented, promptly submitted request — ideally prepared with a registered tax practitioner — has a materially better chance of success than a late or vague one.
How to Avoid VAT Penalties
Most VAT penalties are entirely preventable with the right systems in place. A few habits make the biggest difference:
- Submit and pay before the deadline, not on it. VAT201 returns and payments are typically due on the 25th (or last business day) of the month following the tax period. Submitting a few days early removes the risk of a bank cut-off or eFiling delay pushing you into penalty territory.
- Reconcile VAT monthly, not at year-end. Errors compound the longer they go unnoticed, and understatement penalties scale with the size of the error.
- Keep VAT collected separate from operating cash. Never treat VAT you’ve charged customers as available working capital — ring-fence it so the liability is already covered when the return is due.
- Respond to SARS correspondence immediately. Ignoring a notice doesn’t stop the monthly administrative penalty from accumulating.
- Get a second review before submitting. A qualified accountant catching a calculation error before submission is far cheaper than an understatement penalty after the fact.
If you’re already behind, don’t wait for the penalty to grow — our Tax Compliance & Advisory service can step in to assess your exposure, submit outstanding returns, and prepare a remission request on your behalf.
Frequently Asked Questions
How is the SARS VAT interest rate calculated?
Interest on unpaid VAT is calculated daily on the outstanding balance at the prescribed rate, currently 10.25% per annum as of 2 March 2026. Unlike the 10% late payment penalty, this interest continues to accrue for as long as the debt remains unpaid — there is no cap.
Is the 10% VAT penalty charged every month, or just once?
The 10% late payment penalty under Section 39 of the VAT Act is a once-off charge on the outstanding amount. It’s the separate administrative non-compliance penalty (for an outstanding return) that recurs monthly until the return is filed.
What’s the difference between a VAT penalty and VAT interest?
A penalty is punitive — it exists to discourage non-compliance. Interest is compensatory — it accounts for the time value of the money SARS was owed. This distinction matters for waivers: SARS is generally more willing to remit penalties than interest, since interest is rarely treated as punitive.
Can a tax practitioner get my VAT penalty reduced?
Yes. A registered tax practitioner can submit a formal request for remission on your behalf, and for substantial understatements, SARS specifically requires a practitioner’s opinion to support a mandatory waiver. Having professional representation materially improves the outcome of most remission requests.
What should I do if I’ve missed several VAT submissions?
Contact a registered tax practitioner before SARS escalates the matter further. In many cases, businesses that are significantly behind can use SARS’s Voluntary Disclosure Programme to regularise their position with reduced penalty exposure, rather than waiting for SARS to identify the shortfall itself.
Need Help With a VAT Penalty?
If SARS has already issued a VAT penalty, or you want to make sure your business never receives one, SL Accounting Services can help. We handle VAT reconciliations, submissions, and SARS remission requests for businesses across Centurion and Gauteng — so penalties become someone else’s problem to manage, not yours.
Related reading:
- When Does Your Business Need to Register for VAT?
- Common SARS Penalties Small Businesses Must Avoid
- Tax Compliance & Advisory Services
Sources:
SARS Budget 2026 FAQ — current interest rates
SARS: Request for Remission of Administrative Non-Compliance Penalty
