South Africa: Rules For Levying Interest On The Late Payment Of VAT

Last Updated: 1 February 2016
Article by Gerhard Badenhorst

Most Read Contributor in South Africa, September 2018

The rules regarding the levying of interest on the late payment of value added tax ("VAT") are often confusing, and the introduction of the Tax Administration Act, No 28 of 2011 (the "TAA") has contributed to the uncertainty as to the rules that are applicable.

Levying of interest

The TAA introduced a new interest regime for the levying of interest on unpaid taxes to ensure that the levying of interest is aligned across all taxes.

Section 187(1) of the TAA provides that interest accrues and is payable on the amount of the outstanding balance of a tax debt at the prescribed rate, from the effective date of the tax to the date the tax is paid.  The 'prescribed rate' is an annual interest rate that the Minister of Finance from time to time fix by notice in the Government Gazette (currently 9.5%).  Section 187(2) of the TAA provides that the interest is calculated on the daily balance owing and compounded monthly.  The effective date in respect of the various taxes is described in section 187(3) for each type of tax..

Although section 187(1) of the TAA is in force, it is only applicable in so far as it relates to interest on an understatement penalty and on a tax debt resulting from a jeopardy assessment under the TAA.  In terms of Proclamation 51 of 2012 (published in Government Gazette 35687 on 14 September 2012) only certain parts of section 187 of the TAA came into force on 1 October 2012 when the TAA was implemented.  Proclamation 51 also stipulates that the amendments in Schedule 1 of the TAA to any of the provisions of a tax Act relating to interest, shall not take effect. 

This means that the interest provisions of the TAA are not yet applicable to the late payment of VAT.  The relevant section under which interest is imposed is section 39(1)(a)(ii) of the Value-Added Tax Act, No 89 of 1991 (the "VAT Act"), which is still in force despite its repeal by the TAA.

Section 39(1)(a)(ii) of the VAT Act provides that interest will be imposed "on the said amount of tax at the prescribed rate".  "Tax" is defined in the VAT Act to mean tax chargeable in terms of the VAT Act, i.e. only the VAT amount. A vendor is therefore only liable to pay interest on the unpaid VAT amount, and not also on any penalty or interest.  This is contrary to section 187(1) of the TAA which provides for interest to be levied on a "tax debt", which is defined to include the VAT amount and interest and penalties thereon.

Section 4 of the TAA provides that where there is any inconsistency between the TAA and another tax Act then the other Act prevails.  Consequently, where interest on late VAT payments are imposed in terms of section 39(1) of the VAT Act, it can only be levied on the VAT amount, and not also on penalties imposed.  Section 39(1) of the VAT Act further provides for the levying of simple interest as opposed to compound interest as provided for in section 187(2) of the TAA.  Although section 39(8) of the VAT Act provides for interest to be levied on the daily balance and to be compounded monthly, it is subject to the Commissioner publishing a notice to that effect in the Government Gazette.  No such notice has yet been published. Consequently section 39(8) of the VAT Act is not yet applicable and thus simple interest is levied in terms of section 39(1).  Section 39(8) of the VAT Act will be deleted when the interest provisions of the TAA come into effect, and compound interest will only be chargeable from such date.

It is the SARS practice to impose interest for a full month during which a VAT amount remains outstanding, even if the amount was paid during the course of the month.  There is no basis for such practice in terms of the VAT Act, and interest at the prescribed rate (being an annual rate) should only be levied for the actual period the amount remains unpaid.

Remittance of interest

Section 187(6) of the TAA provides that interest payable may be remitted if the interest is imposed due to circumstances beyond the control of the taxpayer.  Such circumstances are limited to a natural or human-made disaster, a civil disturbance or disruption in services, or a serious illness or accident.

The interest is, however, imposed in terms of section 39(1) of the VAT Act, and therefore the interest should also be remitted in terms of the provisions of the VAT Act, and not in terms of the TAA.

Section 39(7)(a) of the VAT Act provided the Commissioner with a discretion to remit, in whole or in part, the interest imposed where the failure on the part of the vendor to pay the VAT amount timeously was due to circumstances beyond the vendor's control.  Section 39(7) of the VAT Act was repealed by schedule 1 to the TAA with effect from 1 October 2012, but not to the extent to which it relates to interest, as provided for in Proclamation 51.

The term 'circumstances beyond the control' is not defined or explained in the VAT Act.  SARS issued VAT Interpretation Note 61 on 29 March 2011 in which it considered such circumstances to be generally those that are external, unforeseeable, unavoidable or in the nature of an emergency, such as an accident, disaster or illness which resulted in the person being unable to make payment of VAT when due.  The Interpretation Note also sets out the procedure that should be followed for the interest to be remitted.

Interest is levied on late tax payments to prevent vendors from delaying the payments of tax to the detriment of the State, and to ensure that it is compensated for the use of money due to the State. It is for this reason that the discretion of SARS to remit interest imposed is limited to circumstances where the taxpayer had no control over the failure to pay the VAT when it became due. However, it often happens under the VAT system that a late payment of VAT that was not charged by a vendor does not give rise to any prejudice to the State due to the fact that such payment, if charged, would have qualified as input tax by another vendor.  In these circumstances, the vendor remains liable for interest at the prescribed rate when its VAT position is regularised, but SARS does not have any discretion to remit the interest even though there was clearly no loss to the State. 

The lack of discretion for SARS to remit the interest in these circumstances often serves as a deterrent for taxpayers to regularise VAT accounting errors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
DLA Cliffe Dekker Hofmeyr
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
DLA Cliffe Dekker Hofmeyr
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions