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).
It is thus clear that where the South African Revenue Service
("SARS") raises an additional assessment
imposing an additional amount of tax payable by the relevant
taxpayer, SARS may also impose an understatement penalty, provided
that the relevant requirements are met.
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"
