The Benefits of the Voluntary Disclosure Programme

South African Revenue Services has introduced The Voluntary Disclosure Programme (VDP). The VDP was implemented in terms of the Voluntary Disclosure Programme and Taxation Laws Amendment Act, 2010 and is effective from the 1st of November 2010 to 31st of October 2011. Many questions, with no adequate answers have been asked by many taxpayers. In this newsletter we attempt to respond to some questions, promote and provide clarity regarding the programme.

Scope of the programme

The purpose of the programme is to give taxpayers an opportunity to come clean by disclosing their tax defaults and/or exchange control contraventions. Also SARS wants to enhance a culture of compliance in both the tax and exchange control environments.

Tax defaults in this context include:

• Submission of inaccurate or incomplete information to the Commissioner;
• Failure to submit required information; or
• Assumptions presented to SARS about one’s tax liability, where such submission, non- submission, or assumptions resulted in:
  • the applicant not being assessed for the correct amount of tax;
  • the correct amount of tax not being paid by the taxpayer; or
  • an incorrect refund being made by the Commissioner

This is not an amnesty because the full capital amount of tax remains payable.

Note** The default must have occurred prior to 17 February 2010.

Who may apply?

Any person (individual and/or legal entity) may apply, whether in a personal, representative, withholding or other capacity.

What taxes can you apply amnesty for?

All form of taxes such as: Income tax, pay as you earn (PAYE) (employee’s tax), value-added tax (VAT), diesel refunds, customs duties, excise duties and levies, donations tax, estate duty, mineral and petroleum resource royalties, royalties, secondary tax on companies (STC), stamp duty, securities transfer tax (STT), transfer duty, turnover tax and uncertified securities tax (UST).

Type of applications that can be made

There are two types of applications that can be made:

1. General application
   • The taxpayer will disclose their identity and tax information and supporting documents in the application.
2. Anonymous application
   • No identification will be submitted to SARS, and SARS will issue a non-binding opinion indicating whether or not the applicant would qualify for any relief and if so to what extent.
   • The applicant may however decide to continue or discontinue with the application.

How far back is SARS willing to dig for information?

SARS can go back as far as when the default occurred. Due to record-keeping restraints, SARS has a limit of going back as far as 5 years, only when a minor default is concerned. If the default involves extraordinary income or transactions, the Commissioner will use his discretion on how far back they might have to consider. This is only in a few instances but the minimum is five years.

What are the benefits of the programme?

If SARS accepts that your application is a disclosure that meets the conditions set out in the legislation, the following relief will be granted:

• Penalty relief
  • No penalties will be charged. Penalties for late submission of returns and late payments may, however, be charged.
• Interest relief
  • 50 per cent interest relief for applicants who required permission from the Commissioner
  • 100 per cent interest relief for all other applicants.
• Additional tax relief
  • SARS will impose no additional tax.
• Criminal prosecution relief
  • SARS will not initiate criminal prosecution for any Tax Act offence, or related common law offences

What happens if an application is unsuccessful?

SARS will communicate the decision in writing and no further steps will be taken. Unfortunately there are no appeal remedies for a VDP application.

If SARS subsequent to the conclusion of the VDP agreement, is of the opinion that the disclosure does not meet the requirements, such agreement and any relief afforded will be regarded as null and void.

To conclude: SARS has offered taxpayers an opportunity to come clean and put their tax house in order. When the Tax Administration Bill comes into effect, SARS will not be willing to put forward an agreement in place and SARS officials will be able to act as "judge and jury".