2. Agencias internacionales de noticias
2.5 Reuters
An administrative non-compliance penalty means a penalty imposed by SARS in accordance with Chapter 15 of the TA Act, and excludes an understatement penalty. It comprises both fixed-amount and percentage-based penalties. A fixed-amount penalty is charged when an administrative obligation is not complied with, and the percentage-based penalty is generally imposed when certain amounts of tax are not paid.
Fixed-amount penalties
A fixed amount penalty is imposed when a vendor does not comply with a legally required obligation. Such penalties may only be imposed in respect of the non-compliance listed in a public notice that will be issued by the Commissioner and not every act of non-compliance under a tax Act.
77
Section 210(2) of the TA Act. 78
There are currently no such penalties for transgressions of the VAT Act included in any public notice as required under the TA Act.
VAT 404 – Guide for Vendors Chapter 10
Percentage-based penalties
A percentage-based penalty is imposed if SARS is satisfied that an amount of tax was not paid as and when required under the tax Act. In the case of VAT, SARS may impose a penalty equal to the percentage, as prescribed in the VAT Act, of the amount of unpaid tax. The procedure for the imposition and remittance of a percentage based penalty is regulated by the TA Act.79
The circumstances that trigger the imposition of the penalty remains in the VAT Act, for example, when a vendor fails to pay VAT within the period allowed for payment, a 10% penalty is imposed.80 10.2.2 Understatement penalty (USP)
The previously imposed “additional tax” of up to 200%, has been replaced by the USP. Any USP which is applicable will be included in an assessment issued by SARS and must be paid by the date specified in the notice of assessment.81 USP may only be imposed if the fiscus is prejudiced by the vendor’s conduct in reporting. The fiscus will be prejudiced if there is a shortfall, which is the difference between the correct amount of tax that should have been reported and the amount that was reported by the vendor in respect of a tax period. The prejudice must have been because a vendor –
• defaulted in rendering a return;
• filed a return but omitted an item from that return; or
• filed a return in which an incorrect statement was made.
For instance, if a vendor did not file a return but conducted an enterprise and should have filed VAT returns and paid VAT of R90 000, the shortfall is the difference between R90 000 and zero. The shortfall is, therefore, an expression of the prejudice to the fiscus. The USP table is then used to identify the highest applicable percentage to each shortfall in relation to each understatement in a return82 that best describes the facts of the case and the vendor’s behaviour in respect of each understatement of that return.
USP table
The TA Act provides for different rates of USP, based on the type of behaviour or the degree of culpability involved, as shown in the table below83:
1 Item 2 Behaviour 3 Standard case 4 If obstructive, or if it is a “repeat case” 5 Voluntary disclosure after notification of audit 6 Voluntary disclosure before notification of audit (i) Substantial understatement 10% 20% 5% 0%
(ii) Reasonable care not taken in completing
return
25% 50% 15% 0%
(iii) No reasonable grounds for tax position taken
50% 75% 25% 0%
(iv) Gross negligence 100% 125% 50% 5%
(v) Intentional tax evasion 150% 200% 75% 10%
79
Sections 217 and 218 of the TA Act. 80
Section 213 of the TA Act now imposes the penalty and section 39 of the VAT Act prescribes the applicable percentage (currently 10%).
81
In terms of section 222(1) of the TA Act, in the event of an understatement by the vendor, tax must be payable for the relevant period together with the understatement penalty unless the understatement resulted from a bona fide inadvertent error.
82
Section 222(2) of the TA Act. 83
The table was amended with effect from 16 January 2014 to reduce some of the penalties under items (i) to (iii).
The amount of USP is determined by the amount resulting from applying the highest applicable understatement penalty percentage in accordance with the USP table to the shortfall in each tax period. In other words, if a vendor’s behaviour involves both that no reasonable grounds exist for a tax position taken (item (iii) in the table) and gross negligence (item (iv) in the table), then gross negligence (item (iv)) will apply.
No USP will, however, be imposed if it the vendor can prove that the understatement was as a result of a bona fide inadvertent error.
The various behaviours will indicate the extent of the penalty that might be imposed. Once the behaviour has been determined, SARS must determine whether –
• the vendor made a voluntary disclosure before or after being notified of an audit,
• the vendor was obstructive when engaging with SARS officials;
• it is a repeat case; or
• the case is not defined by any of the above and is thus a standard case.
If none of these behaviours can be identified, USP could still be imposed if the prejudice to SARS is the greater of 5% of the tax properly chargeable or R1 million. This is referred to as a “substantial understatement”.
Refer to the Short Guide to the TA Act, 2011 or more details on the various behaviours.
10.3
INTEREST
Chapter 12 of the TA Act provides that interest due or payable will be calculated on the daily balance owing and will be compounded monthly. This gives effect to the principle that interest is compensation for the loss of the use of money. The compounded method of calculating interest will only apply as and when the Commissioner publishes a notice announcing when the new interest calculation method will apply, as well as the tax to which this method of interest will apply.
Refer to the Short Guide to the TA Act, 2011 and Interpretation Note 68 (Issue 2) dated 7 February 2013 “Provisions of the Tax Administration Act that did not Commence on 1 October 2012 under Proclamation No. 51 in Government Gazette 35687” for more details on the new interest rules envisaged under the TA Act.
The current rules provide that interest at the prevailing rate, under section 80 of the Public Finance Management Act (PFMA), will be charged per month or part thereof on late payments of VAT. This is calculated from the first day of the month after the month in which payment was due, until and including the month in which the outstanding amount has actually been paid. Interest is also charged on any late payment of additional tax which has been levied upon assessment.
Example 24 – Calculation of interest
Mr P is required to submit his VAT return and payment of R3 000 in respect of the May 2014 tax period by 25 June 2014. He only submits this return and payment on 25 July 2014. The interest (per month) is calculated as follows:
0,750%84 interest per month or part of a month = R22,50 (Interest payable for 1 month)
84
This is 1/12th of the annual rate applicable at the time. The rate changes from time to time under section 80 of the PFMA. In this example, the rate at the time was 9% per annum. From 1 November 2014 the rate changed to 9.25%. (For the prevailing rate of interest on outstanding taxes refer to the table of interest rates on the SARS Website.)
VAT 404 – Guide for Vendors Chapter 10