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Does the failure to register for VAT timeously qualify as a ‘default’ for VDP purposes?

09 June 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Does the failure to register for VAT timeously qualify as a ‘default’ in terms of VDP? 

I have received conflicting opinions on this, and having spoken to the VDP unit, I have been unable to obtain a satisfactory answer, which would provide certainty for the taxpayer.

The member of the CC is under audit in his personal capacity. The CC in question is not under audit.

The taxpayer had attempted to register for VAT in a CC, and had exceeded the compulsory registration threshold. After many unsuccessful visits to SARS to register, the taxpayer gave up - it appears they were not advised that this was not an acceptable outcome, nor to pursue the registration, even tough SARS appears to have refused to register them (which was clearly incorrect).

The taxpayer now wishes to commence trading again, and this has arisen when they are trying once again to register for VAT.

Please advise the route the taxpayer should follow to regularize their affairs, bearing in mind that the default is failure to register for a tax, and the member of the corporation is under audit in their personal capacity.

My interpretation is that failure to register is not a qualifying default in terms of the definition, and further that the default does not involve the potential imposition of an understatement penalty.

If, however, the taxpayer did register and had been dishonest and submitted nil returns, or understated their taxes, then they would qualify for VDP. (Which seems unreasonable, as in this case the taxpayer DID try to register and gave up due to delays and repeat visits.)

A: One of the requirements for the Voluntary Disclosure Programme is that it must involve a ‘default’ which has not previously been disclosed by the applicant (or a person referred to in section 226(3)).  

A default is then defined as the submission of inaccurate or incomplete information to SARS, or the failure to submit information or the adoption of a ‘tax position’, where such submission, non-submission, or adoption resulted in—

a) the taxpayer not being assessed for the correct amount of tax;

b) the correct amount of tax not being paid by the taxpayer; or

c) an incorrect refund being made by SARS.

The problem here is that the person failed to register as a vendor and that does not in itself constitute a default – it is an offence (in terms of section 234(a) of the Tax Administration Act).  

One of the biggest advantages of the Voluntary Disclosure Programme is that, in terms of section 229, SARS will not pursue criminal prosecution for a tax offence arising from the ‘default.  For the criminal offences refer to sections 234 and 235. 

We agree that the failure to register may be the failure to submit information, but that it is not a default for purposes of the Voluntary Disclosure Programme. Note that the Voluntary Disclosure Programme provides no relief for the "late payment of tax” – refer to section 229(c).  At the moment no penalty is imposed for the late submission of a return, but the relief will also not be granted for the late submission of the penalty. This may also be confirmation that it is not the intention of the voluntary disclosure program to provide relief for persons who didn’t register. 

As the service offered by SAIT is limited to guidance we can’t "advise the route the taxpayer should follow to regularize their affairs”.  You mention that it "has arisen when they are trying once again to register for vat”, but we are not sure what the facts are, i.e. was a new application made and denied.  It may well be advisable to approach SARS, particularly because they have put in an application to register previously.

The fact that the member is under audit is not relevant as it must be the person seeking the relief who must be under audit. 

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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