• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 7/24/2013

South Africa - Proposed relief from tax understatement penalties 

July 24: Draft proposals would provide certain relief from a tax penalty regime enacted in South Africa and effective beginning October 2012.

Under the current penalty regime, taxpayers with an “understatement” of tax are subject to an understatement penalty ranging between 5% and 200% of the amount by which the taxpayer understated the amount of tax payable or by which the taxpayer overstated tax loss carryforwards.

The percentage of the applicable penalty depends on the “behavior” of the taxpayer giving rise to the understatement—e.g., the degree of care taken by the taxpayer in completing the return as well as other factors such as whether the taxpayer had applied for voluntary disclosure.

The South African Revenue Service has limited authority to abate the understatement penalties.

To address certain effects of the penalty regime, pending tax legislation would afford some penalty relief—such as when a return contains an understatement of tax because of a bona fide error on the part of the taxpayer, or for returns submitted prior to the October 2012 effective date of the penalty regime.

Read a July 2013 report prepared by the KPMG member firm in South Africa: Draft Amendments provide some relief from new penalty regime

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