In short, the SARS Voluntary Disclosure Program incentives taxpayer to “come clean” by giving relief from penalties and criminal prosecution if a taxpayer voluntarily tells SARS about the tax skeletons in their closet that SARS did not know about already.
One might think SARS makes it very easy for taxpayers to do so and always welcomes money, effectively offered on a silver platter, with open arms.
The fact is, in our experience, they don’t always make it easy. Whilst it pains us to admit it, they are right for making it a “little bit” difficult with applications being more frequently rejected nowadays (or at least so we hear – we have never had one of our VDP applications being rejected) especially following the infamous SCA judgment in the Purveyors case. The program actually has a fairly limited scope and, as we understand SARS’ position, it is certainly not designed to give all and any non-compliant taxpayers more favorable treatment that compliant ones. We also assist clients with SARS objections and appeals.
The Voluntary Disclosure Programme (VDP) of SARS is a legislative tool that enables taxpayers to voluntarily reveal and regularise their tax affairs if they have any defaults or non-compliance.
Applicants who qualify for the VDP and complete the programme’s standards can receive immunity from penalties and protection from criminal prosecution. The VDP hopes to improve the level of voluntary compliance as well as the way the tax system is managed.
Some benefits of participating in the SARS VDP are:
Any individual, company or trust that has a default or non-compliance in their tax affairs can apply for the SARS VDP, provided that the disclosure are, amongst a few other requirements:
Here are the steps of the VDP process in more detail:
The role of SARS in the SARS VDP can be summarised as follows:
SARS is in charge of running the VDP process, which includes receiving and processing the VDP applications, asking for and verifying the information and documents provided by the applicants, issuing and enforcing the VDP agreements, adjusting or raising the assessments as needed, granting relief from penalties and criminal prosecution, and sending letters of confirmation.
SARS must figure out how much tax, interest, and penalties (if any) the applicants owe based on the information and documents they put in their VDP applications, applying the relevant tax laws and rules, and figuring out how much the applicants have to pay under their VDP agreements.
SARS decide whether to accept or reject the VDP applications, whether to ask the applicants for more information or clarification, whether to approve or deny the payment arrangements requested by the applicants, whether to change or cancel the VDP agreements if the applicants break the rules or commit fraud, and whether to take legal action against applicants that don’t follow the VDP agreements.
Here are a few examples of how Unicus Tax Specialists has effectively aided clients with the SARS VDP:
Applications where the disclosures to be made either stretch across multiple tax types or multiple disciplines of tax (for example corporate tax, VAT, CGT, STT, CFC imputation, tax residency, off-shore funds, normal income tax etc.)
Applications where there are multiple years/tax periods to be disclosed in the application
These are typically disclosures that have to be made but where there is a limited amount of evidence and supporting documents available in respect of the tax defaults to be disclosed.
Whilst there are a number of requirements, the three main ones that often cause trouble are:
SARS must not be aware of the default
The disclosure must be full and complete in all material respects.
The disclosure may not result in a refund.
The SARS VDP is a program that allows taxpayers to voluntarily disclose and regularise their tax affairs and receive relief from penalties and criminal prosecution.
No. One would have to institute an action in the High Court.
Yes, under the right circumstances.
Someone would participate in the SARS VDP to avoid the consequences of non-compliance, such as audits, investigations, penalties, interest, criminal charges, or civil litigation.
Any taxpayer who satisfies all the requirements for a valid VDP application.
A taxpayer must apply online or at a branch, submit all the necessary information and documents, and wait for SARS to evaluate and respond to their application. SARS will then send a letter to the taxpayer, accepting or rejecting their application and stating the amount they owe under the VDP agreement. The taxpayer must either accept or reject the agreement and make payment within the stipulated time period.
Benefits of participating in the SARS VDP are in general relief from certain serious penalties, criminal prosecution.
The SARS VDP is available for most types of defaults or taxes. It excludes customs and excise duties, levies, and taxes that are not under SARS’s jurisdiction. It also excludes defaults that are already under scrutiny or prosecution by SARS.
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