Johannesburg, 16 February 2015 – The Tax Administration Laws Amendment Act, which was published in the Government Gazette on 20 January 2015, provides welcome relief for provisional taxpayers in the form of reduced penalties.

Prior to the amendments, the late submission of a second provisional tax return which had an inadequate estimated taxable income could result in the taxpayer being imposed with the inadequate estimate penalty, late payment penalty and late submission penalty.

"There are numerous amendments to these penalties," says Joon Chong, senior associate at Webber Wentzel. "Notably, the late submission penalty will be repealed with effect from tax years commencing on or after 1 March 2015. In addition, the inadequate estimate penalty will be reduced by any late payment penalty imposed for the same provisional tax period, for tax years commencing on or after 1 March 2014."

When the amendments take effect, the default mentioned earlier could result in reduced penalties as the taxpayer will not be imposed with the late submission penalty. Further, the inadequate estimate penalty will be a net amount after reducing the late payment penalty imposed for the same period.

“The taxpayer should 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 with due regard to the relevant factors and not deliberately or negligently understated.” says Chong.

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