Africa-Press – South-Africa. A new tax amendment introduces stricter rules on understatement penalties, expands SARS’s enforcement powers, and places greater emphasis on full disclosure and professional advice, while offering limited relief.
This was explained by Tax Consulting South Africa’s partner and head of strategic engagement and compliance, Jashwin Baijoo.
The Tax Administration Laws Amendment Act of 2026 was assented to by President Cyril Ramaphosa on 31 March 2026 and published in the Government Gazette on 1 April 2026.
It introduces several significant changes to the Tax Administration Act (TAA), including amendments affecting understatement penalties.
Among the most relevant for taxpayers are revised provisions dealing with Suspensions of Payment and the Remission of Understatement Penalties.
With the 2026 filing season approaching, Baijoo stressed that taxpayers must familiarise themselves with these amendments, file their income tax returns on time, and provide the relevant information.
Should they fail to do so, the South African Revenue Service (SARS) will issue an estimated assessment, under which the purported debt is immediately due and payable.
SARS has far-reaching collection powers. It can, in such cases, move swiftly to attach taxpayers’ bank accounts, garnish salaries, and attach assets.
Notably, it can do all this before the taxpayer has had a chance to prove that the estimated assessment is excessive or even incorrect.
Baijoo added that a new measure of relief is offered to taxpayers with the amendment to section 164 of the TAA.
It will now expressly encompass that a taxpayer who requests, or intends to request, a reduced assessment under section 95(6) of the TAA may apply for a Suspension of Payment.
On paper, this means that while SARS considers whether to issue a reduced assessment, the taxpayer may secure temporary relief from the immediate threat of enforced collection.
Another amendment relates to the “Understatement penalty percentage table”, contained in section 223 of the TAA, which can be seen below.
BehaviourStandard caseIf obstructive, or if it is a “repeat case”Voluntary disclosure after notification of audit or investigationVoluntary disclosure before notification of audit or investigationSubstantial under-statement10%20%5%0%Reasonable care not taken in completing return25%50%15%0%No reasonable grounds for tax position taken50%75%25%0%Impermissible
avoidance arrangement75%100%35%0%Gross negligence100%125%50%5%Intentional tax evasion150%200%75%10%
Changes to understatement penalties
Section 222(1) of the TAA has historically forgiven innocent mistakes by providing taxpayers with reprieve, as no understatement penalty was payable if the understatement resulted from a bona fide, inadvertent error.
Although the rule was written very broadly, it wasn’t applied that way in practice, and the legislative amendments to sections 222 and 223 do not remove this saving grace, Baijoo said.
Rather, it clarifies that the carve-out was intended only to apply to cases of substantial understatement, which result in penalties of 20% or less.
This category is triggered by an objective calculation, not by taxpayer behaviour, which can result in a penalty of up to 200%.
Under section 222(1) of the amendment, tax understatements involving behaviour subject to a penalty under section 223 require the taxpayer to pay the understatement penalty in addition to the tax due.
The amendment, therefore, removes the exception for bona fide inadvertent errors as a standalone relief. It also makes a substitution to section 223(3).
As per the amendment, SARS must grant remission for penalties imposed for substantial understatements if the understatement arose from a bona fide, inadvertent error.
SARS must also grant remission where the taxpayer made full disclosure of the arrangement causing prejudice to the fiscus by the return due date and held a favourable independent opinion by a registered tax practitioner.
The opinion must be issued by no later than the return due date and must confirm the likely legal standing of the taxpayer’s position.
According to Baijoo, this amendment emphasises full disclosure and professional tax advice as critical factors in determining eligibility for penalty remission.
Other noteworthy amendments to the TAA
Baijoo explained that another noteworthy amendment to the TAA concerns section 11’s notification of legal proceedings.
It stipulates that a minimum of 10 business days’ written notice to SARS is required before instituting legal proceedings in the High Court, unless otherwise directed by the court.
Changes are also made to section 45, specifying that SARS officials may conduct inspections without prior notice at premises suspected of carrying on a trade or enterprise to verify –
The occupier’s identity and registration for tax
The existence and suitability of the physical address provided in registration applications for conducting stated activities
Compliance with sections 29 and 30, which cover registration and tax obligations
Under section 68, the Act restricts the disclosure of information likely to prejudice the economic interests or financial welfare of South Africa, including contemplated changes to taxes, levies, duties, penalties, or interest.
Amendments to section 227 clarify that certain penalties and definitions in the TAA do not apply to underpayments as defined in the Customs and Excise Act.
Finally, under Sections 247 and 249, SARS may serve notices at addresses provided by companies under specified sections, and companies are required to maintain a continuously filled office for receiving such notices.
Baijoo said the 2026 Tax Administration Laws Amendment Act introduces important clarifications and procedural enhancements to the administration of tax disputes, penalty relief, and enforcement actions by SARS.
“Key changes enable taxpayers to seek payment suspension under more defined conditions while ensuring SARS can exercise discretion to protect fiscal interests,” he explained.
“The amendments on understatement penalties prioritise disclosure and professional tax opinions, fostering transparency and compliance.”
For those who already find themselves on the wrong side of SARS, Baijoo urged them to take advantage of the first-mover advantage.
“In instances of ‘risk’, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax and compliance strategy is followed,” he said.
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