There are, however, circumstances when, notwithstanding that the taxpayer has erred, SARS will remit the penalty if the taxpayer is in possession of an opinion by a registered tax practitioner.
An understatement will arise when prejudice is caused to SARS as a result of:
If there has been an understatement the taxpayer will, in addition to the tax payable for the relevant tax period, pay an understatement penalty on the tax shortfall.
When there has been a "substantial understatement" the penalty will be 25% in a standard case and 50% if the taxpayer has been obstructive or it is a repeat case. A "substantial understatement" occurs when the prejudice to SARS for the relevant tax period exceeds 5% of the amount of tax properly chargeable or refundable, or R1 million.
SARS must, however, remit the penalty for a "substantial understatement" if the taxpayer makes a full disclosure of the arrangement by no later than the date that the relevant return was due, and if the taxpayer is in possession of an opinion by a registered tax practitioner. The opinion from the tax practitioner must:
For example, a taxpayer fails to include a R5 million receipt in his income, based upon an opinion issued by a tax practitioner stating that the receipt was not revenue in nature but capital, SARS carries out an audit on the taxpayer and disputes the exclusion and issues an assessment for the income. Ordinarily the taxpayer would receive at least a 25% penalty, but because he had an opinion from a registered tax practitioner before the date of the return confirming that the receipt was capital in nature, the penalty must be remitted.
SAMRA 2 days
