• Service: Tax, International Executive Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 5/3/2013

South Africa - Reform of tax penalty regime 

May 3: A new, consolidated penalty regime provides the South African Revenue Service (SARS) with an arsenal of hefty financial sanctions to punish aberrant taxpayers that understate their tax liabilities or otherwise fail to comply with administrative rules.

These financial sanctions comprise two categories of penalties:

  • Administrative non-compliance penalties, which may be either fixed amount or percentage-based
  • Understatement penalties

KPMG observation

The new penalty regime is viewed by some as being more objective, easier to understand, and less prone to arbitrary exercise of discretion by SARS officials. Nonetheless, the new system may open the door to the risk of overlapping penalties. For example, an individual taxpayer who does not file a provisional tax return in time, and who already has two outstanding returns since the 2007 tax year may face:

  • A fixed amount administrative non-compliance penalty
  • A 10% penalty on the amount of provisional tax not paid, evied as a percentage-based administrative non-compliance penalty
  • An understatement penalty equal to a percentage of the shortfall in unpaid provisional tax that arises when there is a default in rendering a return

Consequently, for a single infringement, the taxpayer could be subject to multiple penalties. Whether this would actually happen in practice is uncertain because SARS still has discretion in issuing penalties.

Read an April 2013 report prepared by the KPMG member firm in South Africa: Overview of SARS new penalty regime

©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now

Contact us