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Who will be responsible for deducting the 40% penalty if the tax-free investment limit?

20 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: The annual contribution limit for tax-free investments is R30 000. A 40 per cent penalty is levied by SARS on the excess above the annual limit. Who must withhold or deduct this penalty? What if the individual invested in different companies? Or will the penalty be payable on assessment? What if the taxpayer is below the tax threshold?

A: The newly introduced section 12T(7) Income Tax Act provides that 40% of the amount contributed in excess of either the R30 000 annual threshold or the R500 000 life time threshold will be deemed to be an amount of normal tax payable by that person in respect of that year of assessment. In our view the non-compliance would be determined on assessment and would then be added as normal tax payable in the assessment, therefore no withholding of the deemed normal tax amount would apply. 

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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