Conventional shunt capacitors (SC) with series reactor can filter the harmonic currents generated by the load in addition to improving the power factor. However, a trade-off exists between the harmonic filtering effect and the harmonic voltage tolerance because its admittance is fixed. This paper focuses on the SC with series inverter (active SC) and proposes a novel control system to satisfy both the harmonic filtering effect and the harmonic voltage tolerance. The proposed control system adjusts the equivalent admittance of the active SC according to the grid harmonic voltage. The active SC contributes to the harmonic compensation in normal condition. When the harmonic voltage rises excessively, it protects itself from the overload. Theoretical analysis reveals that the DC voltage of the inverter can be as low as 10% of the rated grid voltage. Experimental results verify that the active SC can filter a harmonic current as high as 50% of its rated current, and tolerate a harmonic voltage around two times higher than the conventional SC with series reactor. Moreover, it is verified that the active SC can operate properly under unbalanced grid voltage and transients of harmonic voltages.