How to Handle SARS Outstanding Returns and Avoid Company Deregistration

To handle SARS outstanding returns, you must identify missing submissions via eFiling, calculate any owed tax plus interest, and submit the returns immediately. Resolving these defaults prevents SARS from initiating legal action and stops the CIPC from deregistering your company for non-compliance. Prompt action is the only way to avoid administrative penalties and maintain your tax clearance status.

Running a small business in South Africa is demanding, and sometimes administrative tasks like tax filings slip through the cracks. However, having SARS outstanding returns is a risk that can lead to the freezing of bank accounts or the permanent closure of your business entity. In 2026, the South African Revenue Service (SARS) has significantly enhanced its data-matching capabilities, making it nearly impossible for non-compliant businesses to fly under the radar.

What are SARS outstanding returns for small businesses?

SARS outstanding returns refer to any required tax declarations—such as Income Tax, VAT, or PAYE—that were not submitted by their respective legal deadlines. When a return is not filed, SARS marks the taxpayer as non-compliant, which triggers automated administrative penalties and impacts your Tax Compliance Status (TCS).

For a typical South African SME, these returns usually include the annual ITR14 (Company Income Tax return) or the ITR12 (Personal Income Tax for sole traders). If you are registered for Value Added Tax, missing your bi-monthly VAT201 submissions also creates a backlog of SARS outstanding returns. Similarly, employers must submit EMP201 returns monthly and EMP501 reconciliations twice a year to account for Pay-As-You-Earn (PAYE) and Unemployment Insurance Fund (UIF) contributions.

Why does having SARS outstanding returns lead to deregistration?

SARS and the Companies and Intellectual Property Commission (CIPC) share data to ensure that only active, tax-compliant companies continue to operate. If a company fails to file its annual returns with the CIPC or its tax returns with SARS for several consecutive periods, it is flagged for deregistration.

Deregistration is a legal process where the company effectively ceases to exist. This means your business can no longer legally trade, enter into contracts, or manage its bank accounts. Any assets owned by the company at the time of deregistration technically forfeit to the State. Reinstating a deregistered company is a costly and time-consuming process that often requires a formal application and the payment of significant back-dated fees.

How can you check for SARS outstanding returns on eFiling?

You can check for SARS outstanding returns by logging into your SARS eFiling profile and navigating to the 'Compliance Dashboard' under the 'General Configuration' tab. This dashboard provides a real-time view of all missing returns across different tax types, including Income Tax, VAT, and PAYE.

The dashboard uses a color-coded system—usually red for non-compliant and green for compliant. By selecting the specific tax type, you can see exactly which periods are missing. It is vital to perform this check monthly to ensure no administrative errors have caused a return to be flagged as 'not received.'

What are the penalties for SARS outstanding returns in 2026?

Non-compliance penalties range from R250 to R16,000 per month for each month the return remains outstanding, depending on the company's taxable income. These administrative penalties are levied regardless of whether the business actually owes tax or not; the mere act of not filing is the trigger.

In addition to fixed monthly penalties, SARS charges interest on any unpaid tax amounts. This interest is compounded monthly at the prescribed rate. If SARS determines that the failure to file was 'intentional tax evasion,' they can apply understatement penalties that can reach up to 200% of the tax due. For 2026, SARS has become more aggressive in issuing 'final demands' via SMS and email, giving taxpayers only 21 days to rectify the situation before legal recovery begins.

How do you settle SARS outstanding returns step-by-step?

To settle SARS outstanding returns, you must first gather all financial records for the missing periods, calculate the figures, and submit the returns via eFiling. Once submitted, you must pay the resulting assessments or enter into a formal payment arrangement with SARS to clear the debt.

Step 1: Gather your financial data

You cannot file accurately without proper records. Collect all bank statements, invoices, and expense receipts for the periods in question. If you are behind on your bookkeeping, this is the time to catch up. Accurate data ensures you don't overpay tax or trigger an audit due to inconsistencies.

Step 2: Prepare and submit the returns

Log into eFiling and request the relevant returns. For Company Income Tax (ITR14), ensure you have your financial statements ready. For VAT, ensure your input and output tax tallies match your accounting software records. Submit the returns in chronological order, starting with the oldest period first.

Step 3: Handle the assessments and penalties

Once submitted, SARS will issue an Assessment (ITA34 or VAT201 notice). This will show the tax due plus any accumulated penalties and interest. If you cannot afford the full amount immediately, do not ignore it. You can apply for a 'Deferral of Payment' or a 'Compromise of Tax Debt' through the eFiling system.

Step 4: Verify your compliance status

After payment or the approval of a payment plan, return to your Compliance Dashboard. It may take 24 to 48 hours for the status to update to 'Compliant.' Once compliant, you can download a new Tax Compliance Status (TCS) PIN, which is often required by clients, banks, and for government tenders.

Can you apply for a waiver of penalties on outstanding returns?

Yes, you can apply for a Request for Remission (RFR) of penalties if you have a valid reason for the non-compliance, such as a serious illness or a natural disaster. SARS will generally only consider a waiver if the underlying SARS outstanding returns have already been filed and the taxpayer has a history of trying to comply.

When submitting an RFR, you must provide supporting documentation. For example, if your business was affected by civil unrest or a technical failure of your accounting system, you must provide proof. Note that 'forgetting' to file or 'not knowing' the law are rarely accepted as valid reasons for a penalty waiver.

How to avoid SARS outstanding returns in the future?

The best way to avoid SARS outstanding returns is to implement an automated accounting system and a strict tax calendar. Setting aside time every month to review your tax obligations ensures that deadlines for VAT, PAYE, and provisional tax are never missed.

Maintain digital records

In 2026, manual record-keeping is a liability. Using a digital platform ensures that your invoices and expenses are tracked in real-time. This makes generating a VAT or Income Tax report as simple as clicking a button, drastically reducing the time required to file returns.

Understand the tax calendar

South African businesses face several key dates. Income Tax returns for companies are due within 12 months of their financial year-end. Provisional tax payments are due every August and February. Monthly PAYE and VAT returns have their own specific cycles. Mark these dates on your calendar and set reminders at least two weeks in advance.

Delegate to professionals or automation

If your business is growing, you may no longer have the time to manage SARS compliance yourself. Hiring a professional bookkeeper or using a specialized platform like Smartbook can automate much of this workload. Automation reduces human error, which is a leading cause of SARS outstanding returns.

What happens if your company is already in the deregistration process?

If the CIPC has already moved your company into 'Deregistration Process' status, you must act swiftly by filing all missing annual returns with the CIPC and ensuring your SARS tax status is brought up to date. You will often need to submit a formal letter of objection and pay all outstanding fees to halt the process.

If the status is already 'Deregistered,' the process is more complex. You will likely need to provide a 'Tax Clearance Certificate' (which requires all SARS outstanding returns to be cleared) and various identity documents to the CIPC. During this time, your business cannot legally operate, highlighting the importance of proactive compliance.

The role of Tax Clearance in South African business

In the South African economy, a Tax Compliance Status (TCS) is your business's passport. Without it, you cannot apply for government or corporate tenders, you may struggle to get business loans, and many large suppliers will refuse to list you as a vendor. Resolving SARS outstanding returns is not just about avoiding fines; it is about maintaining the commercial viability of your business.

Summary of key actions for SARS compliance

To keep your business safe, follow this checklist:

1. Audit your eFiling profile for any red flags or missing submissions.

2. Prioritize filing any SARS outstanding returns to stop the accumulation of monthly penalties.

3. Communicate with SARS if you have cash flow issues; use the Debt Management tools on eFiling.

4. Ensure your CIPC annual returns are also up to date to prevent institutional deregistration.

5. Move to a modern accounting solution to automate and track your tax obligations.

Managing your relationship with the revenue service doesn't have to be a source of constant stress. By staying organized and addressing issues as they arise, you can focus on what you do best: growing your South African small business. If you find yourself overwhelmed by backlogs, remember that small, consistent steps toward compliance are better than ignoring the problem.

Smartbook is designed to help South African entrepreneurs simplify their bookkeeping and stay on top of their tax obligations. Our platform streamlines the recording of transactions, making it easier than ever to file your returns on time and avoid the headache of SARS outstanding returns. Let Smartbook handle the numbers so you can lead your business with confidence.