Amendments set to benefit provisional taxpayers

Joon Chong, senior associate at South African law firm, Webber Wentzel.

The Tax Administration Laws Amendment Act, which was published in the Government Gazette on 20 January 2015, provides welcome relief for provisional taxpayers who would otherwise have been penalised multiple times for a variety of infringements.

That's according to Joon Chong, senior associate at South African law firm, Webber Wentzel. She says, “The amendments were introduced because provisional tax payers could be penalised twice for the same action and the penalties imposed were considered too onerous."

Prior to their introduction, provisional taxpayers could be penalised for using an inadequate estimation of their taxable income, submitting their second provisional returns late and also for paying their second provisional returns late.

"The new regulatory framework will see the late submission penalty repealed with effect from March 2015. In addition, for tax years commencing on or after 1 March, the inadequate estimate penalty will be reduced by any late payment penalty imposed for the same provisional tax period," explains Chong.

Therefore, a taxpayer who submits a late second provisional tax return with an estimated taxable income of less than 80% of its actual taxable income will not be subjected to a late submission penalty. In addition, the inadequate estimate penalty will be reduced by the late payment penalty for that period.

“The taxpayer may request a remission of the inadequate estimate penalty on the basis that the late submission was not intended to evade or postpone the payment of tax and that the estimate was calculated seriously with due regard to the relevant factors and not deliberately or negligently understated,” says Chong.

Further grounds for remission include the facts that the non-compliance was a "first incidence"; that there were reasonable grounds for the non-compliance; and that the non-compliance has been remedied.

Chong concludes, "It's not often that tax amendment statutes benefit taxpayers, but these changes are good news for provisional tax payers."