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Tax Facts - Taxpayer Penalties

Taxpayers who do not meet their tax obligations may face penalty or interest charges. To avoid such charges, you should pay the full amount of tax you owe by the due date.

The main kinds of charges for failing to meet tax obligations are:

  • Interest on the amount of tax you owe if you have underpaid your tax. The interest rates charged are based with reference to market rates.
  • late filing penalty if you do not file a return by the due date.
  • late payment penalty if a payment is not received by the IRD by the date it was due.
  • shortfall penalty where the correct amount of tax is higher than the amount you paid (for example, because of an understatement of tax, or where the amount of a refund or loss is reduced). These penalties can be as high as 150% (for evasion) and may include imprisonment for serious instances of evasion.
  • Non-payment of employer deductions penalty. If you file your Employment information (IR348) but don't pay the amount calculated by the due date, Inland Revenue will send you a reminder. If you don't pay the overdue amount or enter an instalment arrangement, they charge you a non-payment penalty (NPP) as well as the late payment penalties and interest. The non-payment penalty is 10% of the amount outstanding. Every month you do not pay in full or enter into an instalment arrangement, a further 10% penalty is added.

Solutions such as tax pooling can also be used to manage tax and limit exposure to penalties and use of money interest.

For more information about managing tax, give us a call.  For more information about tax penalties refer to the IRD's Penalties and interest guide.

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