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The ability of taxpayers to address tax defaults

09 June 2015   (0 Comments)
Posted by: Authors: Natalie Napier and Pranith Meht
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Authors: Natalie Napier and Pranith Meht (Hogan Lovells)

The South African Revenue Service (SARS) initially introduced a tax amnesty under the guise of a voluntary disclosure programme (VDP), which ran from November 2010 to October 2011. The VDP aimed to encourage tax defaulters to disclose their tax defaults, resulting in them receiving relief from penalties. From 1 October 2012, SARS implemented a permanent VDP in the Tax Administration Act (TAA).

What is a VDP?

The VDP is a statutory process where taxpayers, including corporate entities, trusts and individuals, can approach SARS on a voluntary basis with a view to regularise their tax affairs with the prospect of remittance of certain penalties.

Which types of taxes are covered by the VDP?

The VDP is applicable to all taxes administered by SARS (excluding customs and excise).

What are the requirements for the submission of a valid VDP application?

The disclosure must be voluntary. 

It must:

  • Involve a default that has not previously been disclosed by the applicant or a representative of the applicant.
  • Be full and complete in all material aspects.
  • Involve the potential imposition of an understatement penalty in respect of the default.
  • Not result in a refund due by SARS.
  • Be made in the prescribed form and manner.

What is the period under review?

The period of review under the VDP is not stipulated in the TAA, although the disclosure must be full and complete in all material respects if it is to be a valid disclosure. Strictly speaking, SARS should go back for as many years as the tax default has occurred.  However in practice SARS will generally not go back further than five years in calculating the tax outstanding in terms of the tax VDP. 

What is a default?

A default is 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:

  • The taxpayer not being assessed for the correct amount of tax.
  • The correct amount of tax not being paid by the taxpayer.
  • An incorrect refund being made by SARS.

A South African tax resident who fails to disclose income tax, interest income, dividends or capital gains tax generated from off-shore assets is an example of a default that may have been committed.

Who is excluded from applying for a VDP? 

However, SARS may allow such a person to participate in the VDP when it is of the opinion that the default would not ordinarily have been detected by SARS during the audit/investigation.

A "verification” or "inspection” procedure that was not preceded by the commencement of an audit or by a notice of an impending audit is not regarded as an "audit” for this purpose, and a person will still be able to apply for a VDP in this instance.

Benefits of a VDP

As a result of the disclosure, the Commissioner may not pursue criminal prosecution for any statutory offence under a tax act arising from the "default” or a related common law offence committed by the successful applicant.

The successful applicant will obtain:

  • Relief in respect of understatement penalties to the extent referred to in the understatement penalty percentage table, which provides for a reduction in the percentage of penalties to be levied.
  • 100% relief in respect of an administrative non-compliance penalty that was or may be imposed in terms of the TAA, or a penalty imposed under a tax act, but excluding penalties for the late submission of a return, and penalties for the late payment of tax.

This article first appeared on 


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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