Global

Details

  • 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




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