In a media statement dated 30 November 2022, the South African Revenue Service (“Sars”) stated that they are encouraging all taxpayers who may be in default on their tax affairs to approach Sars via the Voluntary Disclosure Programme (“VDP”). By coming forward willingly, said taxpayers will receive the help and advice from Sars to expedite their compliance.

Sars further stated that:

“Where through its own investigative processes, Sars discovers non-compliance, it will not avail this opportunity to non-compliant taxpayers but will act within the remit of the law to deal with non-compliance.”

From the above we can see that Sars is firmly committed to the pursuit of strategic intent, which aligns with Commissioner Kieswetter’s message and aim to promote voluntary compliance, whilst lowering the cost of compliance. To this end, Sars wants all taxpayers to understand that they always have an opportunity to regularise their tax affairs. While voluntary compliance is Sars’ first preference, Sars is refining its’ capability to detect and make it difficult and costly for non-compliant taxpayers.

The VDP Process

Taxpayers who have already attracted the attention of Sars due to non-compliance, by either being selected for an audit, or who have received a final letter of demand, will unfortunately not be able to participate in the VDP.

They will have to go through the normal processes by correcting their errors which will attract penalties and interest in addition to their outstanding tax liability. They may even expose themselves to criminal prosecution. Sars has recently shown an increasing willingness to prosecute these matters, as has been seen from the recent judgements and the pursuance of action against non-compliant taxpayers, regardless of how high or low profile they may be. 

It is clear from the above that the Commissioner of Sars certainly does not make empty promises or idle threats, as he has, on numerous occasions, indicated that Sars are going after non-compliant taxpayers. We are now seeing this come to fruition. 

Should taxpayers have failed to declare any income, Sars may impose penalties up to 200% of the capital tax liability. In order to avoid this, errant taxpayers must strike whilst the iron is hot and declare previously undeclared income through the ongoing VDP, which is regulated by the Tax Administration Act. 

A major benefit of relief sought through the VDP, is that it covers all tax types (income tax, employees’ taxes such as Pay-as-You-Earn, Unemployment Insurance Fund contributions and the Skills Development Levy, as well as Value-Added-Tax). The only taxes that are not covered are customs and excise duties.

When a taxpayer is granted relief under the VDP, penalties are waived, and the applicant receives amnesty from criminal prosecution. The taxpayer will only be liable for the outstanding tax liability as well as the interest levied thereon. 

A proactive approach

As always, we encourage taxpayers to be proactive regarding their tax affairs, and not to bury their head in the sand. We can see from Sars’ narrative in their media statement that the benefits of coming forward voluntarily far exceed the implications of Sars knocking on your door before you approach them through the VDP. 

The Sars VDP process remains a legal mechanism to protect you against Sars prosecution where you have been non-compliant; but this process must be completed under legal privilege and can only happen before Sars starts their audit/verification or investigation into your affairs. 

We advise taxpayers who have become aware of any non-disclosure of income to come forward and apply for relief through the VDP, in order to avoid the wrath of Sars, and to become fully compliant while this window is still open and before Sars comes knocking at your door.

Written by Andre Daniels, Legal Manager: Tax Controversy and Dispute Resolution at Tax Consulting