The Voluntary Disclosure Programme (“VDP”) has, for more than a decade, been one of the most effective compliance mechanisms available to taxpayers wishing to regularise historical tax defaults. By encouraging voluntary compliance through certainty and relief from criminal prosecution, understatement penalties and administrative penalties, the VDP has enabled thousands of taxpayers to return to compliance while simultaneously improving revenue collection for SARS.

One aspect of the VDP, however, has consistently undermined its attractiveness.

While taxpayers obtaining VDP relief could secure amnesty from criminal prosecution as well as substantial protection from penalties, they remained fully liable for interest that had accrued on the underlying tax liability. In many cases, particularly where defaults stretched back several years, the interest component exceeded the capital tax itself. This often created an uncomfortable paradox. Taxpayers were encouraged to come forward voluntarily, yet doing so could still expose them to crippling interest liabilities with no legislative mechanism to seek simultaneous relief.

Following the Constitutional Court's judgment in Commissioner for the South African Revenue Service v Medtronic International Trading S.A.R.L (Medtronic), many practitioners feared that this position had become permanently entrenched.

The 2026 Draft Tax Administration Laws Amendment Bill now proposes to correct the legislative limitation identified in Medtronic.

If enacted in its current form, the amendment represents one of the most important taxpayer-friendly developments to the VDP regime since its introduction.

The Medtronic Judgment

The Constitutional Court was required to consider whether a taxpayer could combine a VDP application with a request for remission of interest under the relevant tax legislation.

The taxpayer argued that while Chapter 16 of the Tax Administration Act regulates voluntary disclosure relief, nothing prevented SARS from simultaneously considering an application for remission of interest.

The Constitutional Court disagreed.

It held that the Tax Administration Act contains no legislative authority permitting SARS to entertain both applications together. Once a VDP agreement has been concluded, neither the agreement nor the relief granted under it may subsequently be varied unless legislation expressly authorises such variation.

Importantly, the Court made it clear that this was not merely an administrative difficulty, but rather a a legislative limitation.

In other words, SARS lacked the statutory power to grant simultaneous consideration of both forms of relief. The Court indicated that any change would require Parliament to amend the legislation.

That is precisely what National Treasury has now proposed. 

The Proposed Amendment

Clause 14 of the Draft Tax Administration Laws Amendment Bill proposes an amendment to section 229 of the Tax Administration Act.

The amendment would specifically permit a taxpayer applying for voluntary disclosure relief to simultaneously apply, under the relevant tax Act, for remission of interest relating to the tax defaults disclosed in the VDP application.

Importantly, the Draft Explanatory Memorandum states that the remission application will be made under the provisions of the relevant tax Act. The amendment therefore does not expand the relief available under Chapter 16 of the TAA itself, but rather widens the remission process to include tax liabilities raised under the VDP process. 

This creates legislative bridge that the Constitutional Court said was absent.

Why This Matters

For many taxpayers considering voluntary disclosure, interest has always been the largest remaining financial exposure after relief from understatement penalties. 

Where tax defaults extend over several years, interest continues to accrue daily. Even where the underlying tax liability is relatively modest, accumulated interest can substantially increase the cost of regularisation.

Practitioners have frequently encountered situations where taxpayers were willing to disclose historical defaults but were deterred by the unavoidable interest exposure.

It is for these reasons that the practical significance of the amendment should not be underestimated.

Rather than having a VDP regime which may have had the result of financially crippling the taxpayer, the proposed amendments to legislation would permit a possible remission of interest in appropriate circumstances, granting relief not only in terms of criminal prosecution and penalties, but also in respect of interest. 

This also allows taxpayers to make informed commercial decisions regarding the total financial consequences of voluntary disclosure before entering into a binding agreement with SARS.

A More Effective, but Still Discretionary, Relief Mechanism

The proposed amendment may materially improve the appeal of the VDP by addressing one of the principal concerns that has historically discouraged taxpayers from making voluntary disclosures.

The success of any VDP depends on taxpayers perceiving a meaningful benefit in approaching SARS before their non-compliance is detected. By allowing an application for remission of interest to be considered alongside a VDP application, the proposed amendment may encourage taxpayers who have delayed regularising their affairs because of mounting interest liabilities to come forward sooner.

This would benefit both taxpayers and SARS. Taxpayers would be better incentivised to come voluntarily come forward and declare any defaults, while SARS may benefit from earlier regularisation and the more efficient collection of outstanding tax liabilities.

The proposed amendment must, however, be understood in its proper context. It does not create an automatic entitlement to the remission of interest, nor does it guarantee that every taxpayer who submits a VDP application will obtain such relief.

Rather, the amendment would provide the legislative authority necessary for a taxpayer to submit an interest remission application simultaneously with a VDP application. The merits of that remission application would still need to be considered under the applicable provisions of the relevant tax Act.

Accordingly, the proposed amendment would improve access to possible interest relief without removing the statutory requirements that must be satisfied or, where applicable, SARS’ discretion to determine whether remission is justified in the circumstances.

Looking Ahead

The proposed amendment is one of the clearest examples of National Treasury responding constructively to judicial interpretation.

Rather than attempting to circumvent the Constitutional Court's reasoning, Treasury has accepted the Court's conclusion that legislative authority was lacking and has proposed precisely that authority.

From a tax administration perspective, the amendment is sensible. 

The primary objective of the VDP has always been to encourage taxpayers to voluntarily return to compliance. Allowing simultaneous consideration of interest remission aligns with that objective and removes a practical obstacle that has discouraged disclosure in many cases.

While the proposal remains subject to the public consultation process and may still change before enactment, it represents a welcome development for taxpayers and practitioners alike.

If enacted substantially in its present form, the amendment would restore flexibility to the voluntary disclosure regime, improve certainty for applicants, and further strengthen one of South Africa's most successful tax compliance initiatives. 

Written by André Daniels, Head of Tax Controversy & Dispute Resolution at Tax Consulting SA; and Dylan Jacobs, Tax Attorney at Tax Consulting SA