Category: Tax Administration Act No. 28 of 2011

Section 215 (TAA) – Procedure to request remittance of penalty

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215.    Procedure to request remittance of penalty

 

(1)     A person who is aggrieved by a ‘penalty assessment’ notice may, on or before the date for payment in the ‘penalty assessment’, in the prescribed form and manner, request SARS to remit the ‘penalty’ in accordance with Part E.

 

(2)     The ‘remittance request’ must include-

 

(a)     a description of the circumstances which prevented the person from complying with the relevant obligation under a tax Act in respect of which the ‘penalty’ has been imposed; and

 

(b)     the supporting documents and information as may be required by SARS in the prescribed form.

 

(3)     During the period commencing on the day that SARS receives the ‘remittance request’, and ending 21 business days after notice has been given of SARS’ decision, no collection steps relating to the ‘penalty’ amount may be taken unless SARS has a reasonable belief that there is-

 

(a)     a risk of dissipation of assets by the person concerned; or

 

(b)     fraud involved in the origin of the non-compliance or the grounds for remittance.

 

(4)     SARS may extend the period referred to in subsection (1) if SARS is satisfied that-

 

(a)     the non-compliance in issue is an incidence of non-compliance referred to in section 216 or 217, and that reasonable grounds exist for the late receipt of the ‘remittance request’; or

 

(b)     a circumstance referred to in section 218(2) rendered the person incapable of submitting a timely request.

 

(5)     If a tax Act other than this Act provides for remittance grounds for a “penalty”, SARS may despite the provisions of section 216, 217 or 218 remit the “penalty” or a portion thereof under such grounds.

Section 222 (TAA) – Understatement penalty

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222.    Understatement penalty

(1)     In the event of an “understatement” by a taxpayer, the taxpayer must pay, in addition to the “tax” payable for the relevant tax period, the understatement penalty determined under subsection (2) unless the ‘understatement’ results from a bona fide inadvertent error.

(2)   The understatement penalty is the amount resulting from applying the highest applicable understatement penalty percentage in accordance with the table in section 223 to each shortfall determined under subsections (3) and (4) in relation to each ‘understatement’.

[Subsection (2) substituted by section 75(a) of Act 39 of 2013 and by section 23(a) of Act 22 of 2018.]

(3)     The shortfall is the sum of-

(a)     the difference between the amount of ‘tax’ properly chargeable for the tax period and the amount of ‘tax’ that would have been chargeable for the tax period if the ‘understatement’ were accepted;

(b)     the difference between the amount properly refundable for the tax period and the amount that would have been refundable if the ‘understatement’ were accepted; and

(c)     the difference between the amount of an assessed loss or any other benefit to the taxpayer properly carried forward from the tax period to a succeeding tax period and the amount that would have been carried forward if the ‘understatement’ were accepted, multiplied by the tax rate determined under subsection (5).

(4)  

(a)   If there is a difference under both paragraphs (a) and (b) of subsection (3), the shortfall must be reduced by the amount of any duplication between the paragraphs.

(b)   Where the ‘understatement’ is the failure to submit a return, the ‘tax’ that resulted from the ‘understatement’, had the ‘understatement’ been accepted, for purposes of subsection (3), must be regarded as nil.

[Subsection (4) substituted by section 75(c) of Act 39 of 2013 and by section 23(b) of Act 22 of 2018.]

(5)     The tax rate applicable to the shortfall determined under subsections (3) and (4) is the maximum tax rate applicable to the taxpayer, ignoring an assessed loss or any other benefit brought forward from a preceding tax period to the tax period.

(6)     Any penalty imposed under subsection (2) must be reduced by any penalty imposed under section 4(2) of the Employment Tax Incentive Act, 2013, in respect of the same employment tax incentive amount.

[Subsection (6) added section 27(1) by of Act 16 of 2022 deemed effective on 1 September 2022, and applicable to any return, for purposes of paragraph 14(2) of the Fourth Schedule to the Income Tax Act, submitted or after that date]

Section 223 (TAA) – Understatement penalty percentage table

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223.    Understatement penalty percentage table

(1)     The understatement penalty percentage table is as follows:

1

Item

2

Behaviour

3

Standard Case

4

If obstructive, or if it is a ‘repeat case’

5

Voluntary disclosure after notification of audit or criminal investigation

6

Voluntary disclosure before notification of audit or criminal investigation

(i)

‘Substantial under-statement’

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%

[Subsection (1) substituted by section 76 of Act 39 of 2013 and section 62 of Act 16 of 2016 effective on 19 January 2017]

(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 to SARS 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

[Paragraph (a) substituted by section 42 of Act 33 of 2019]

(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 216 (TAA) – Remittance of penalty for failure to register

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216.    Remittance of penalty for failure to register

 

If a ‘penalty’ is imposed on a person for a failure to register as and when required under this Act, SARS may remit the ‘penalty’ in whole or in part if-

 

(a)     the failure to register was discovered because the person approached SARS voluntarily; and

 

(b)     the person has filed all returns required under a tax Act.

Section 224 (TAA) – Objection and appeal against imposition of understatement penalty

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224.    Objection and appeal against imposition of understatement penalty

 

The imposition of an understatement penalty under section 222 or a decision by SARS not to remit an understatement penalty under section 223(3), is subject to objection and appeal under Chapter 9.

Section 249 (TAA) – Default in appointing public officer or address for notices or documents

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249.    Default in appointing public officer or address for notices or documents

 

(1)     No appointment is deemed to have been made under section 246(2) until notice thereof specifying the name of the public officer and an address for service or delivery of notices and documents has been given to SARS.

 

(2)     A company must-

 

(a)     keep the office of public officer constantly filled and must at all times maintain a place for the service or delivery of notices in accordance with section 247(1); and

 

(b)     notify SARS of every change of public officer or the place for the service or delivery of notices within 21 business days of the change taking effect.