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Voluntary Disclosure Programme

12 November 2010   (0 Comments)
Posted by: Author: Kerry Watkin
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Voluntary Disclosure Programme 

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 applications. 

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 relief, where—

-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 Commissioner’s resources.

•A person is deemed to be aware of a pending audit or investigation, or that the audit or investigation has commenced, if—

-a representative of the person;

-an officer, shareholder or member of the person, if the person is a company;

-a partner in partnership with the person;

-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—

•be voluntary;

•involve a default;

•be full and complete in all material respects;

•involve the potential application of a penalty or additional tax in respect of the default;

•not result in a refund due by the Commissioner;

•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 payment; 

-treatment of the issue in future years or periods; and

-relevant undertakings by the parties.

•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)



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