Tax Penalties and Interest Are Not Tax-Deductible
When it comes to running a business, staying tax compliant is one of the most important responsibilities you have. But what happens when you get hit with a tax penalty or interest from SARS? Many business owners wonder if these charges can be claimed as a tax deduction.
The short answer is no — tax penalties and interest are not tax-deductible.
Why They Are Not Deductible
Penalties and interest charged by SARS are considered punitive, not operational. In other words, they are meant to discourage non-compliance, not to help you run your business.
SARS (and most tax authorities around the world) does not allow deductions for expenses that arise from breaking the law, even unintentionally. Allowing these to be deductible would, in a sense, reward taxpayers for failing to meet their obligations on time.
What You Can Deduct
While penalties and interest cannot be claimed as an expense, you can still deduct:
-
Normal business operating expenses (such as rent, salaries, and utilities)
-
Professional fees for your accountant or tax practitioner
-
Costs incurred in the production of income
Keeping your taxes up to date ensures these legitimate expenses are always fully deductible and keeps unnecessary costs away from your bottom line.
How to Avoid Penalties and Interest
Here are a few ways to stay compliant and protect your cash flow:
1. Submit returns on time — whether it’s VAT, PAYE, or Income Tax.
-
Make payments before the due date.
-
Keep your records organized so you can file accurately and quickly.
-
Work with a qualified bookkeeper or tax practitioner who can help you track deadlines and avoid costly mistakes.
In Closing
Tax penalties and interest can easily sneak up on a busy business owner, but they’re completely avoidable with the right systems and support in place.
Remember — every rand you save by staying compliant is a rand you can invest back into your business.
Emily Gomes (ICB Senior Bookkeeper)
Senior Bookkeeper
Emily obtained a Senior Bookkeeping National Certificate with ICB and has relevant experience. She has experience in digital marketing design and social media marketing as well as bookkeeping functions, VAT, payroll, PAYE, company secretarial, debtors and creditors for multiple companies.
QuickBooks Certified