Late payment penalties consist of an initial penalty for paying tax late, and monthly incremental penalties on any amounts unpaid. The late payment penalties are calculated on the amount of tax that was paid late or remains unpaid. The incremental penalties are calculated on the amount of outstanding tax plus the initial late payment penalties that were imposed.
The initial late payment penalty is a 1% penalty charged on the day after the due date, and a further 4% penalty charged if there is still an amount of unpaid tax seven days from the due date.
Every month the amount remains owing, a further 1% incremental penalty will be charged. Note in addition to the late payment penalty charged, interest will also be charged.
A shortfall penalty is imposed as a percentage of a tax shortfall (a deficit or understatement of tax) resulting from the actions of a taxpayer.
The penalties are as follows:
- Lack of reasonable care – 20%
- Unacceptable tax position – 20%
- Gross carelessness – 40%
- Abusive tax position – 100%
- Evasion – 150%
Penalties may be reduced on a voluntary disclosure made by the taxpayer to the Inland Revenue Department.
Back to Tax Facts