On the 22 January 2018, the South African Revenue Service (SARS) released a draft guide on understatement penalties for public comment by 12 February 2018. The aim of the guide is to provide taxpayers with an understanding of understatement penalties and their application.
The understatement penalty regime under Chapter 16 of the Tax Administration Act, 2011 (Act No. 28 of 2011) has replaced the discretion to impose ‘additional tax’ under various repealed provisions of the taxation Acts. It is a more equitable and consistent method of imposing penalties to deter non-compliant reporting by taxpayers. The Guide to Understatement Penalties is meant to provide clarity on some of the issues experienced with the interpretation of the applicable legislation and guidance regarding the imposition of understatement penalties.
In the case of understatement by an employer, due to the under withholding of employees’ tax, SARS may impose understatement penalties if it can prove that any of the listed behaviors exist.
