TAX

Understanding understatement penalty

Azwinndini Magadani

In order to encourage tax compliance and to deter unwanted behavior of non-tax compliance including tax evasions, the South African Revenue Service (SARS) which administers the tax Acts is empowered to impose sanctions where non-tax compliance is established.

The sanctions include but not limited to administrative non-compliance penalties, understatement penalties as well as the laying of criminal charges where tax offence has been committed. This article deals with understatement penalty and seeks to provide a basic understanding of the nature thereof and the circumstances under which it is imposed.