The judgment indicated that during November 2003, A Investments Ltd (“A”) disposed of its shareholding in B (Pty) Ltd.During August 2007 Mr Z, together with another shareholder, Mr X, disposed of 600 000 ordinary shares in B (Pty) Ltd to F. The shares represented 30{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of the total issued share capital of B (Pty) Ltd with the taxpayer holding 27,005{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} and Mr X holding the balance.

Mr Z disposed of his shares for R841,655,833. A Investments Ltd informed the taxpayer that it had discovered that Mr Z had withheld material information from it when he represented A during its transaction with F. As a result, A instituted action against Mr Z on the basis of the 2003 transaction and in particular Appellant’s failure, as A’s agent to inform A that F would be prepared to extend minority protections to A. The dissatisfied shareholder claimed an amount of R925,000,000 from Mr Z on the basis that that was the value of the shares and claims it would have held and which it lost by virtue of having disposed of its shares and claims in B (Pty) Ltd. Mr Z concluded a settlement agreement with A to pay it an amount of R694,888,271 in full and final settlement of its claim. Mr Z reflected the net amount derived by him as proceeds for capital gains taxCapital Gains Tax (CGT) is a tax imposed on the profit an individual or entity earns from the sale or disposal of a capital asset. This tax is not levied on the total sale price of the asset but rather on the capital gain, which is the difference between the asset’s acquisition cost (or “base cost”) and its sale price.... purposes and SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... subsequently increased the proceeds of R216,218,233 originally disclosed by the taxpayer by an amount of R625,437,601 to an amount of R841,655,833. The Tax Court reached the conclusion that SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... was correct in disregarding the amount paid by the taxpayer to A of R625,437,601 and thus effectively taxed the taxpayer on an amount he never retained. The court reached the view that the Eighth Schedule to the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act No. 58 of 1962, as amended (“the Act”) afforded no relief to the taxpayer in the particular circumstances. This aspect is not discussed further in this article.

SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... imposed an understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... of R46,907,820 on the amount paid by Mr Z to A. In addition, SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... imposed interest on the alleged underpayment of provisional tax in terms of section 89quat of the Act.

The Commissioner adjusted the taxpayer’s taxable incomeThe tax base is a fundamental concept in taxation, representing the total amount of economic activity or assets upon which a tax is levied. It is the foundation upon which governments calculate the amount of tax owed, based on factors like income, property value, sales, or corporate profits. Understanding the tax base is essential for tax professionals, businesses, and policymakers,... for the 2008 year of assessment and applied the provisions regulating the understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... in terms of section 221 of the Tax AdministrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... Act No. 28 of 2011 (“TAA”).

The Commissioner reached the conclusion that the taxpayer had not taken reasonable care in submitting the tax returnA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations... to SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... or alternatively that there were no reasonable grounds for the tax position taken. The Commissioner applied the understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... table with the result that the penalty was imposed at a level of 75{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}, which was the rate of penalty applicable at that time.

Mr Y gave evidence on behalf of SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... and indicated that the 75{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} penalty was determined by taking account of the fact that there were no reasonable grounds for the tax position taken by the taxpayer.

Most of the provisions of the TAA took effect on 1 October 2012 and at the time of its commencement, the level of penalty imposed on the basis of no reasonable grounds for tax position taken amounted to 75{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}. That was subsequently reduced to an amount of 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} by way of the Tax AdministrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... Laws Amendment Act No. 39 of 2013 with effect from 16 January 2014. However, the court indicated that should the court decide that Mr Z had no reasonable grounds for the tax position taken the penalty provided for is 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}.

The court indicated that Mr Z’s unchallenged evidence was that the tax position he took was based on his belief that his calculation of capital gains taxCapital Gains Tax (CGT) is a tax imposed on the profit an individual or entity earns from the sale or disposal of a capital asset. This tax is not levied on the total sale price of the asset but rather on the capital gain, which is the difference between the asset’s acquisition cost (or “base cost”) and its sale price.... was correct and that there was no intention to evade or delay the payment of tax. The taxpayer sought professional advice regarding the completion of his tax returnsA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations... and denied being negligent in the returns submitted to SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently.... Wepener J accepted that the taxpayer obtained professional advice regarding the submission of his tax returnsA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations... to SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... and the deduction which was the subject of dispute in the case.

The court concluded that the provisions of section 270(6D) of the TAA applied and that the taxpayer had reasonable grounds for the tax position taken by him. The court reached the conclusion that there was a substantial understatement with the result that that triggered the payment of a 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead..... The court decided that there were no extenuating circumstances as envisaged in section 270(6D) of the TAA. In the result the court decided that the understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... should be reduced to an amount of 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}, taking account of the fact that the taxpayer had relied on advice received from his accountant and others.

The court then considered the imposition of interest under section 89quat of the Act and by virtue of the fact that the dispute related to the 2008 year of assessment, the basis on which the court had to decide whether to remit the interest, was whether the taxpayer had acted on reasonable grounds.

The Court made the point that when the court is required to establish the correctness of the exercise of a discretionary decision, which is subject to objection and appeal, the matter must be reheard by the Tax Court. The court referred to Juta’s Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... where the following is stated:

The court came to the conclusion that the taxpayer’s reliance on the advice received was reasonable and therefore directed that the Commissioner should waive the section 89quat interest in full.

Unfortunately, the discretion conferred on SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... to waive interest on the underpayment of provisional tax has been significantly narrowed, such that SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... may only take account of circumstances beyond the control of the taxpayer in respect of years of assessment ending on or after 1 November 2010. For individual taxpayers, the restricted discretion applies with effect from years of assessment ending on or after 28 February 2011.

SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... relied on an internal template setting out the basis on which it determined the understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... applicable to the taxpayer in this case. SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... led evidence relating to the template and the reasons contained thereon, which sets out the process SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... adopted in reaching the conclusion that the taxpayer in this particular case had no reasonable grounds for the tax position taken by him. Taxpayers who are subjected to understatement penaltiesUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... should therefore request reasons from SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... regarding the imposition of the understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... and must remember that where the understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... is challenged, the onus to satisfy the court as to the penalty imposed lies upon SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... in terms of section 102(2) of the TAA.

It is essential that taxpayers exercise caution in submitting their tax returnsA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations... to SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... and seek professional advice from a registered tax practitionerA Tax Advisor is a professional who provides specialised advice to individuals, businesses, and organisations on various tax-related matters. They play a crucial role in guiding clients through complex tax laws and ensuring compliance with the latest regulations while identifying opportunities for tax efficiency. Tax Advisors must stay updated on legislative changes and understand the impact of international tax treaties,... which may assist in reducing the exposure to the imposition of the understatement penaltyUnderstatement penalties are financial sanctions imposed by revenue authorities when a taxpayer under-declares or underreports their taxable income, leading to a shortfall in taxes owed. These penalties aim to deter tax evasion, encourage accurate reporting, and maintain the integrity of the tax system. Penalties may vary based on the degree of culpability, ranging from negligence to deliberate intent to mislead.... where SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... takes a different view regarding the tax treatment of an amount received or a deduction claimed. It must be remembered that where a taxpayer has obtained an opinion from a registered tax practitionerA Tax Advisor is a professional who provides specialised advice to individuals, businesses, and organisations on various tax-related matters. They play a crucial role in guiding clients through complex tax laws and ensuring compliance with the latest regulations while identifying opportunities for tax efficiency. Tax Advisors must stay updated on legislative changes and understand the impact of international tax treaties,... in the manner prescribed under section 223 of the TAA, SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... is compelled to waive the penalty which would otherwise have been imposed. This was not the issue before the court, as the taxpayer did not hold a written opinion for the 2008 year of assessment, as that return was filed long before the TAA took effect. The fact that the taxpayer took advice at the time of completing his returns was sufficient for the court to show that the taxpayer had acted reasonably and therefore the level of penalty to be imposed was 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}, which under the penalty table is the lowest possible level of penalty which can be imposed.