Unutilised Capital Losses – Can SARS Impose Understatement Penalties?
In terms of section 222(1) of the South African Tax Administration Act, 2011 (the “TAA”), “[i]n the event of an ‘understatement’ by a taxpayer, the taxpayer must pay, in addition to the ‘tax’ payable for the relevant tax period, the understatement penalty determined under subsection (2) unless the ‘understatement’ results from a bona fide inadvertent error” (our emphasis).
Section 222(2) of the TAA then provides that this “understatement penalty” “is the amount resulting from applying the highest applicable understatement penalty percentage in accordance with the table in section 223 to each shortfall determined under subsections (3) and (4) in relation to each understatement in a return” (our emphasis).
“any prejudice to SARS or the fiscus as a result of:
“Prejudice” is not defined in the TAA or Income Tax Act, 1962 and, therefore, the ordinary meaning of the word applies. The word prejudice used in the context (of law) means to “cause harm to (a state of affairs)…”
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