instances where taxpayers have understatement their tax liability<\/strong>.<\/p>\nSARS’ understatement penalty regime aims to ensure consistent and equal treatment of taxpayers in comparable circumstances and to deter behaviours that result in non-compliant reporting.<\/p>\n
INR129 specifically addresses situations where the tax rate for a taxpayer’s tax shortfall, resulting from an underestimation of their tax obligations, is determined under subsections (3) and (4) of the Act.<\/p>\n
It also provides clarity on how penalties are to be imposed, with in-depth calculations and examples, as a true indication of SARS’ intention to make non-compliance difficult and costly.<\/p>\n
If taxpayers have failed to declare any income, SARS may impose penalties up to 200% of the capital tax liability<\/strong>.<\/p>\n“To avoid this, errant taxpayers must, before SARS approaches them, declare previously undeclared income through the ongoing Voluntary Disclosure Programme (VDP), which is regulated by the Tax Administration Act,” Daniels said.<\/p>\n
How the rules work<\/strong><\/p>\nAccording to Tax Consulting SA, the TAA, under Section 222(1), imposes an understatement penalty in the event of an understatement by a taxpayer, which must be paid in addition to the tax payable for the tax period, unless the understatement is as a result of a bona fide inadvertent error.<\/p>\n
An “understatement” means any prejudice to SARS or the fiscus as a result of \u2013<\/p>\n
\n- Failure to submit a return required under a tax Act or by the Commissioner;<\/li>\n
- An omission from a return;<\/li>\n
- An incorrect statement in a return;<\/li>\n
- If no return is required, the failure to pay the correct amount of “tax”; or<\/li>\n
- An “impermissible avoidance arrangement”.<\/li>\n<\/ul>\n
The understatement penalty is determined by applying the highest applicable understatement penalty percentage<\/strong> to each shortfall.<\/p>\nEach “shortfall” is determined, depending on the specific facts of the taxpayer, for the respective tax period, Daniels said.<\/p>\n
The Act adds that the “maximum tax rate applicable to the taxpayer” must be applied to determine the shortfall in tax, and this is determined by ignoring an assessed loss or any other benefit brought forward from a preceding tax period to the tax period in which the understatement occurred.<\/p>\n
“Certain taxpayers are taxed either at a flat rate or a progressive rate of tax. The tax rate applicable to taxpayers subject to a flat rate of tax represents the ‘maximum rate applicable to that taxpayer’,” said Daniels.<\/p>\n
For taxpayers that are taxed at a progressive rate of tax, the maximum tax rate applicable to the shortfall is the marginal tax rate applicable to the taxable income or taxable turnover that is established by, ignoring the assessed losses or any other benefit brought forward from a preceding tax period to the tax period in question.<\/p>\n
Daniels noted that the circumstances of each taxpayer are considered when determining the maximum tax rate.<\/p>\n
What this means<\/strong><\/p>\nUnder SARS commissioner Edward Kieswetter, the tax authority has not minced its words when it comes to non-compliance and equal treatment in the eyes of the tax authority.<\/p>\n
Daniels said that the latest interpretation note shows that SARS is not making empty promises when it says it is coming after non-compliant taxpayers – and it has shown that no one is above the law when it makes its moves.<\/p>\n
In March, SARS exemplified this crackdown when the authority provided clarity on the tax status of President Cyril Ramaphosa, stating that through staff and advisory, Ramaphosa was fully compliant in the eyes of SARS.<\/p>\n
At the time, Kieswetter confirmed that he was not approached by President Ramaphosa, or anyone on his behalf, with any request related to his personal and\/or the business entities in question.<\/p>\n
“In taking this exceptional step to disclose the tax status of the President, with his written consent, SARS would also encourage other high-profile political office bearers and leaders in society to consider taking this proactive step as part of their commitment to transparency.<\/p>\n
“This would go a long way towards building confidence in our country’s institutions,” said Kieswetter.<\/p>\n
Daniels said that it is clear from this move that SARS was not making any exceptions and would investigate anyone and everyone to ensure compliance, even the president.<\/p>\n
“We are now seeing this come to fruition, and regardless of one’s station in society, SARS will audit you, and where applicable, penalties will be levied at the applicable rate, of which the maximum is 200% in certain circumstances,” he said.<\/p>\n
“Prior statements made by Kieswetter, and further, clearly evidences that even the State President goes through audits and bears the onus of proving properly declared income.<\/p>\n
“It stands to reason that SARS are now, more than ever, pursuing non-compliant taxpayers regardless of their status, without fear, favour or prejudice.”<\/p>\n
\nRead: <\/strong>Rich South Africans are packing their bags \u2013 and taking billions in tax with them<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"SARS is upping the ante against non-compliant taxpayers – here’s what you need to know.<\/p>\n","protected":false},"author":10,"featured_media":682061,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26,12796],"class_list":["post-692027","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline","tag-tax-consulting-sa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/692027","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=692027"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/692027\/revisions"}],"predecessor-version":[{"id":701187,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/692027\/revisions\/701187"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/682061"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=692027"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=692027"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=692027"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}