Voluntary Disclosure Programme
Voluntary Disclosure Programme
What is the Voluntarily Disclosure Programme (VDP)?
The SARS Voluntary Disclosure Programme (VDP) came into effect under the Tax Administration Act, 2011, with effect from 1 October 2012. The purpose of the VDP is to ensure enhanced tax compliance and efficient use of the tax system and SARS resources. It aims to encourage taxpayers to voluntarily disclose their previously undisclosed tax liabilities to SARS and avoid the imposition of understatement penalties and administrative penalties.
For the period 1 October 2016 until 31 August 2017, a Special Voluntary Disclosure Programme (SVDP) allowed non-compliant taxpayers to regularise their unauthorised foreign assets and income by voluntary disclosing this information. Individuals and companies could apply during the window period from 1 October 2016 until 31 August 2017. The SVDP was intended for individuals and companies who did not disclose tax and exchange control defaults on offshore assets in the past.
Taxpayers who missed this deadline for the SVDP can still use the normal VDP process to disclose offshore income. VDP relief is available regarding all taxes administered by SARS (but excluding duties and levies charged in terms of the Customs and Excise Act, 1964).
What is the benefit of applying to the VDS?
Voluntary disclosure relief is limited to defaults disclosed for which relief is granted as per the VDP agreement. The following relief is available:
- Sars will not pursue criminal prosecution for a tax offence arising from the default.
- Relief in respect of understatement penalties to the extent referred to in the understatement penalty percentage table in terms of of the Act;
- 100% relief in respect of an administrative non-compliance penalty under Chapter 15 of the Act,
- or a penalty imposed under a tax Act but excluding penalty for the late submission of a return.
Who can apply?
Whether in a personal, representative, withholding or another capacity, any person may apply for voluntary disclosure relief.
- Any Voluntarily Disclosure application where the applicant has been given notice of an audit or criminal investigation is not considered voluntary,
- unless a senior SARS official is of the view (having regards to the circumstances and ambit of the audit or investigation) that SARS would not have otherwise detected the default during the audit or investigation, and
- is also of the view that accepting the application would be in the interest of good management of the tax system and best use of SARS’s resources.
What are the requirements for voluntary disclosure?
To ensure that a VDP application is valid, a disclosure must:
- Involve a default that has not occurred within five years of the disclosure of a similar default by the applicant or a person referred to in the Act,
- be complete in all material respects,
- involve a behaviour referred to under the Act,
- not result in a refund due by SARS; and
- be made in the prescribed form and manner.
How do I apply?
The VDP01 must be completed on-line and submitted via SARS eFiling. Applicants who do not have access to the internet and computer facilities can visit any SARS branch, where the VDP01 will be captured on their behalf by SARS staff and submitted on the SARS system.
The applicant must register on SARS eFiling for access to form VDP01.
The VDP01 is self-explanatory and provides information relating to the applicant, the disclosure of the default, the reasons for the default, etc. The more detailed the information is, the bigger the chance of a successful application. Supporting documentation must be attached where required.
What does the process entail?
SARS will evaluate the VDP application and the supporting documentation to determine if the applicant meets the valid voluntary disclosure requirements. Where additional information is required, SARS will either request it or request a meeting with the applicant.
At the end of the evaluation process, the VDP unit will:
- Where the applicant requested a VDP non-binding private opinion, issue the opinion;
- where VDP relief was applied for, and the application is invalid, issue the outcome (with the reasons for the outcome).
- The outcome of a VDP relief application is positive; present a VDP agreement to the applicant for consideration and signature.
What does the Voluntary Disclosure Agreement entail?
The Voluntarily Disclosure agreement captures the relief, rights and obligations of both SARS and the VDP applicant. The Act requires the VDP agreement to include details on the following aspects:
- The material facts of the default on which the voluntary disclosure relief is based;
- the amounts payable by the applicant, which must separately reflect the understatement penalty payable;
- the payment arrangements and dates;
- the relevant undertakings by the parties.
The signed VDP agreement constitutes a contract between SARS and the applicant.
How is the Voluntary Disclosure Agreement Implemented?
The VDP agreement is a contract between SARS and the applicant. Both SARS and the applicant are obliged to give effect to the terms of the contract. As such, SARS will ensure that assessments are adjusted or raised where required and that full effect is given to the relief granted by the Act. On the other hand, the applicant must ensure that payment is effected on the date(s) agreed in terms of the VDP agreement and that any other duty or obligation is given effect to on the agreed terms.
Can the Voluntary Disclosure Agreement be cancelled?
Breach of any material term of the VDP agreement by any of the parties to the VDP agreement can result in the VDP agreement’s cancellation. For example, if payment is not effected on the agreed terms, SARS can cancel the agreement under its common law contractual right to cancel the agreement.
Can SARS Withdraw Voluntarily Disclosure Relief?
Complete disclosure in all material respects is required. Suppose after the conclusion of a voluntary disclosure agreement; it is established that the applicant failed to disclose a matter that was material for purposes of making a valid disclosure. In that case, the Act provides for a senior SARS official to:
- Withdraw any relief that has been granted;
- Regard any amount paid in terms of the voluntary disclosure agreement to constitute part payment of any further outstanding tax debt in respect of the relevant default; and
- Pursue prosecution for a tax offence arising from the default.
Voluntarily disclosure of undisclosed tax liabilities reduces understatement and administrative penalties payable and ensures no criminal prosecution for those voluntarily disclosed tax liabilities subject to full disclosure and compliance with the terms of the Voluntary Disclosure Agreement.
Contact Onestop Accounting if you have any queries on the Voluntary Disclosure program.