Voluntary Disclosure Programme
12 November 2010
Posted by: Author: Kerry Watkin
The Minister of Finance
announced in the 2010 Budget that legislation would be introduced to encourage
taxpayers to regularise prior transgressions of the tax statutes in South
Africa and the Exchange Control Regulations.
Taxpayers are often unaware of
their tax ex-posures but with SARS becoming increasingly vigilant over time,
their inadvertent transgressions may be detected by SARS with the additional
cost of penalties and interest over and above the related tax.The Voluntary
Disclosure Programme (VDP) provides taxpayers with an ideal opportunity to
identify any existing tax exposures and to regularise their tax affairs without
fear of interest and penalties.
The VDP will run from 1
November 2010 to 31 October 2011 and is aimed at all taxes administered by
SARS.The default or violation must have occurred prior to 17 February 2010.The
cut-off date is intended to prevent taxpayers from committing violations on an
ongoing basis and just prior to the period for the submission of
Who may apply?
•Any person may apply, whether
in a personal,representative, withholding or other capacity unless that person
is aware of—
-a pending audit or
investigation into the person’s affairs; or
-an audit or investigation that
has commenced,but has not yet been concluded.
•Notwithstanding the above, the
Commissioner may direct that a person may apply for voluntary disclosure
-the default in respect of
which the person wishes to apply for voluntary disclosure relief would not
otherwise have been detected during the audit or investigation; and
-the application would be in
the interest of good management of the tax system and the best use of the
•A person is deemed to be aware
of a pending audit or investigation, or that the audit or investigation has
-a representative of the
-an officer, shareholder or
member of the person, if the person is a company;
-a partner in partnership with
-a trustee or beneficiary of
the person, if the person is a trust; or
-a person acting for or on
behalf of or as an agent or fiduciary of the person,has become aware of the
pending audit or investigation, or that audit or investigation has commenced.
The requirements for a valid
voluntary disclosure are that the disclosure must—
•involve a default;
•be full and complete in all
•involve the potential
application of a penalty or additional tax in respect of the default;
•not result in a refund due by
•be made in the prescribed form
and manner(at this stage, SARS has not yet released the documentation required
and will probably do so only once the legislation has been enacted);
•be made within the period
prescribed by the Commissioner by notice in the Gazette; and
•be in respect of a default
which occurred prior to 17 February 2010
Confirmation of eligibility: No
name voluntary disclosure
The Commissioner is authorised
to issue a nonbinding private opinion as to whether a person qualifies for the
relief, so long as the person provides sufficient information for SARS to reach
a decision. This information need not include the identity of any party to the
default. Thus, it would appear that tax practitioners may seek guidance from
SARS as to whether a particular taxpayer qualifies for the relief or not.
•No criminal prosecution for
any statutory offence under a tax Act or a related common law offence.
•One hundred per cent relief in
respect of any penalty and additional tax (excluding a penalty imposed in terms
of section 75B of the Income
Tax Act or in terms of a tax
Act for the late submission of a return or for the late payment of tax).
•In respect of interest—
-One hundred per cent; or
-Fifty per cent where the taxpayer
is subject to an audit or investigation and it has been decided by SARS that
the person may still apply for the relief.
•The granting of the relief
must be evidenced by a written agreement between the Commissioner and the
applicant who is liable for the outstanding tax.
•The agreement must be in the
format prescribed by the Commissioner and must include details of—
-the material facts of the
default on which the voluntary disclosure relief is based;
-the amount payable by the
person, which amount must separately reflect the tax payable and the interest
amount payable, if any;
-the arrangements and dates for
-treatment of the issue in
future years or periods; and
-relevant undertakings by the
•The agreement is not subject
to objection and appeal.
•Subsequent to the conclusion
of the voluntary disclosure agreement, if it is established that the applicant
failed to disclose a material fact, the Commissioner may—
-withdraw any relief granted;
-regard any amount paid in
terms of the agreement to constitute part payment of any further outstanding
tax in respect of the relevant default; and
-pursue criminal prosecution.
•Any of the aforegoing
decisions by the Commissioner are subject to objection and appeal or internal review.
Assessment or determination to
give effect to agreement
The legislation requires that
SARS must issue an assessment to the taxpayer reflecting the agreement
concluded under the VDP.Such assessment issued is not subject to an objection
and appeal or internal review in that the assessment will be based on
disclosures made by the taxpayer to SARS under the VDP.
Taxpayers who have failed to
comply with the tax laws should consider availing themselves of the voluntary
disclosure relief.The relief will be available only in respect of applications
lodged with the authorities from 1 November 2010 to 31 October 2011 and is
available to all taxpayers.
Those taxpayers who qualify for
relief will benefit under the VDP in that no additional tax, penalties or
interest will be imposed and, furthermore, SARS will not institute criminal
prosecution.It must be noted that the voluntary disclosure relief does not
constitute an amnesty in that any tax that should have been paid and was not
paid over to SARS,will always remain payable.
Source: By Kerry Watkin (TaxTALK)