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Income Tax Act, 1962 (Act 58 of 1962)

Schedules

Fourth Schedule

Amounts to be Deducted or Withheld by Employers and Provisional Payments in respect of Normal Tax

Part III: Provisional Tax

20. Penalty for underpayment of provisional tax as a result of underestimation

 

 

(1) If in respect of a year of assessment the taxable income of a provisional taxpayer, as determined under this Act, is-
(a) more than R1 million and the final or last estimate of taxable income submitted by that provisional taxpayer in terms of paragraph 19(1)(a) or (b) in respect of that year of assessment is less than 80 per cent of the amount of the provisional taxpayer's taxable income, the Commissioner must impose a penalty, which is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act, equal to 20 per cent of the difference between—
(i) the amount of normal tax, calculated at the rates applicable in respect of that year of assessment and after taking into account any amount of a rebate deductible in terms of this Act in the determination of normal tax payable, in respect of a taxable income equal to 80 per cent of the provisional taxpayer's taxable income; and
(ii) the amount of employees' tax and provisional tax in respect of that year of assessment paid by the end of the year of assessment; or

[Item (1)(a) substituted by section 10(1)(b) of the Tax Administration Laws Amendment Act, 2014 (Act No. 44 of 2014) and came into operation for years of assessment commencing on or after 1 March 2014]

(b) R1 million or less and the final or last estimate of taxable income submitted by that provisional taxpayer in terms of paragraph 19(1)(a) or (b) in respect of that year of assessment is less than 90 per cent of the amount of the provisional taxpayer's taxable income and is also less than the basic amount applicable to that estimate, as contemplated in paragraph 19(1)(d), the Commissioner must impose a penalty, which is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act, equal to 20 per cent of the difference between—
(i) the lesser of—
(aa) the amount of normal tax, calculated at the rates applicable in respect of such year of assessment and after taking into account any amount of a rebate deductible in terms of this Act in the determination of normal tax payable, in respect of a taxable income equal to 90 per cent of the provisional taxpayer's taxable income; and
(bb) the amount of normal tax calculated in respect of a taxable income equal to such basic amount, at the rates applicable in respect of such year of assessment and after taking into account any amount of a rebate deductible in terms of this Act in the determination of normal tax payable; and
(ii) the amount of employees' tax and provisional tax in respect of such year of assessment paid by the end of the year of assessment:

[Subparagraph (1)(b) amended by section 17(a) of the Tax Administration Laws Amendment Act, 2015 (Act No. 23 of 2015)]

Provided that any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit received by or accrued to or to be received by or accrue to the taxpayer during the relevant year of assessment shall not be taken into account for purposes of this subparagraph;

[Subparagraph (1) amended by section 13(a) of the Tax Administration Laws Amendment Act, 2016 (Act No. 16 of 2016)]

 

(2) Where the Commissioner is satisfied that the amount of any estimate referred to in subparagraph (1) was seriously calculated with due regard to the factors having a bearing thereon and was not deliberately or negligently understated, or if the Commissioner is partly so satisfied, the Commissioner may in his or her discretion remit the penalty or a part thereof.

[Subparagraph (2) amended by section 23(c) of Act No. 21 of 2012]

 

(2A) [Subparagraph (2A) deleted by section 13(b) of the Tax Administration Laws Amendment Act, 2016 (Act No. 16 of 2016)]

 

(2B) Any penalty imposed under subparagraph (1) in respect of a year of assessment must be reduced by any penalty imposed under paragraph 27(1) in respect of payment referred to in paragraph 21(1)(b) or 23(b).

[Subparagraph (2B) inserted by section 10(1)(d) of the Tax Administration Laws Amendment Act, 2014 (Act No. 44 of 2014) and came into operation for years of assessment commencing on or after 1 March 2014]]

 

(2C) If—
(a) a provisional taxpayer is deemed in terms of paragraph 19(6) to have submitted an estimate of an amount of nil taxable income due to a failure to submit an estimate by the last day of a period of four months after the last day of the year of assessment; and
(b) the Commissioner is satisfied that the provisional taxpayer's failure was not due to an intent to evade or postpone the payment of provisional tax or normal tax,

the Commissioner may remit the whole or any part of a penalty imposed under subparagraph (1).

[Subparagraph (2C) amended by section 13(c) of the Tax Administration Laws Amendment Act, 2016 (Act No. 16 of 2016)]

 

(3) [Subparagraph (3) deleted by section 10(1)(f) of the Tax Administration Laws Amendment Act, 2014 (Act No. 44 of 2014)]

 

(4)        [Subparagraph (4) was deleted by the Tax Administration Act, 2011 (Act No. 28 of 2011)].

 

[Paragraph 20 substituted by section 10(1)(a) of the Tax Administration Laws Amendment Act, 2014 (Act No. 44 of 2014)]