Tax Administration Act, 2011 (Act No. 28 of 2011)Chapter 16 : Understatement PenaltyPart A : Imposition of understatement penalty223. Understatement penalty percentage table |
| (1) | The understatement penalty percentage table is as follows: |
1 |
2 |
3 |
4 |
5 |
6 |
Item |
Behaviour |
Standard case |
If obstructive, or if it is a "repeat case" |
Voluntary disclosure after notification of audit or investigation |
Voluntary disclosure before notification of audit or criminal investigation |
(i) |
"Substantial understatement" |
10% |
20% |
5% |
0% |
(ii) |
Reasonable care not taken in completing return |
25% |
50% |
15% |
0% |
(iii) |
No reasonable grounds for "tax position" taken |
50% |
75% |
25% |
0% |
(iv) |
'Impermissible avoidance arrangement' |
75% |
100% |
35% |
0% |
(v) |
Gross negligence |
100% |
125% |
50% |
5% |
(vi) |
Intentional tax evasion |
150% |
200% |
75% |
10% |
[Section 223(1) substituted by section 62 of the Tax Administration Laws Amendment Act, 2016 (Act No. 16 of 2016)]
| (2) | An understatement penalty for which provision is made under this Chapter is also chargeable in cases where— |
| (a) | an assessment based on an estimation under section 95 is made; or |
| (b) | an assessment agreed upon with the taxpayer under section 95(3) is issued. |
| (3) | SARS must remit a "penalty" imposed for a "substantial understatement" if SARS is satisfied that the taxpayer— |
| (a) | made full disclosure of the arrangement, as defined in section 34, that gave rise to the prejudice to SARS or the fiscus by no later than the date that the relevant return was due; and |
| (b) | was in possession of an opinion by an independent registered tax practitioner that— |
| (i) | was issued by no later than the date that the relevant return was due; |
| (ii) | was based upon full disclosure of the specific facts and circumstances of the arrangement and, in the case of any opinion regarding the applicability of the substance over form doctrine or the anti-avoidance provisions of a tax Act, this requirement cannot be met unless the taxpayer is able to demonstrate that all of the steps in or parts of the arrangement were fully disclosed to the tax practitioner, whether or not the taxpayer was a direct party to the steps or parts in question; and |
| (iii) | confirmed that the taxpayer's position is more likely than not to be upheld if the matter proceeds to court. |
[Section 223(3) substituted by section 76 of the Tax Administration Laws Amendment Act, 2013 (Act No. 39 of 2012)]