# How does SARS calculate interest on PAYE?

Last Updated on September 21, 2023 by ufiling

SARS (South African Revenue Service) calculates interest on PAYE (Pay-As-You-Earn) using specific guidelines and formulas. The calculation takes into account the amount of tax owed, the period of time for which the tax is outstanding, and the applicable interest rate.

Here is a general overview of how SARS calculates interest on PAYE:

1. Determine the amount of tax outstanding: SARS identifies the amount of PAYE tax that remains unpaid or not fully settled by the due date. This includes any outstanding tax liabilities, penalties, or additional amounts due.
2. Determine the period of time: SARS calculates the number of days from the due date of payment until the actual date of settlement. This period is usually counted in days, but it can be adjusted for weekends, public holidays, or other non-working days.
3. Determine the interest rate: SARS applies an interest rate, which is set by legislation, to calculate the interest payable on the outstanding tax amount. The interest rate may vary over time and is typically specified in the Tax Administration Act or related regulations.
4. Calculate the interest amount: SARS applies the interest rate to the outstanding tax amount for each day in the period of time calculated earlier. The interest is calculated on a compound basis, meaning that interest is charged on the outstanding tax amount plus any previously accrued interest.
5. Determine the total interest payable: SARS sums up the daily interest charges for the entire period to arrive at the total interest payable. This amount is added to the outstanding tax liability to determine the final amount owed.

It’s important to note that specific details and variations in the calculation may exist, so it’s advisable to consult the official SARS guidelines or seek professional advice to obtain the most accurate and up-to-date information regarding the calculation of interest on PAYE.

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