SARS Voluntary Disclosure Programme
The Voluntary Disclosure Programme (VDP), accessible to eligible taxpayers since 2011, provides a chance for those not adhering to the rules to reveal this to the South African Revenue Service (SARS). By making such a disclosure, the taxpayer can rectify their standing with SARS and potentially seek mitigation of any potential penalties that might be levied.
The Voluntary Disclosure Program (VDP) helps resolve tax returns issues without penalties. It is important to act before SARS contacts you. The VDP process is the only way to avoid prosecution processes from SARS for not reporting income or taxes. It is important to remember this. If you do not report your income or taxes, you could face legal consequences. The VDP process provides a way to rectify this situation and avoid potential penalties.
The Voluntary Disclosure Program (VDP) applies to all taxes managed by SARS. These taxes include income tax, employees' tax (such as PAYE, SDL, UIF), and VAT. However, the VDP does not apply to Customs and Excise. However, it does not apply to Customs and Excise.
VOLUNTARY DISCLOSURE RELIEF
- SARS provides taxpayers with the opportunity to evade criminal charges and normalize their tax situations by submitting a disclosure under the VDP. A successful VDP application enables an applicant to obtain a penalty waiver and resolve any outstanding tax debts with SARS. The defaults disclosed and information to SARS must be new information in order to qualify.
- The benefits of a successful VDP application
- Regularise tax affairs;
- Remittance of 100% of understatement penalties;
- Remittance of 100% of administrative non-compliance penalties;
- Transfer foreign funds back to South Africa “clean”; and
- Amnesty from criminal prosecution.
COMMON REPORTING STANDARDS
- South Africa is among the countries that enforce the Common Reporting Standards (CRS), a system designed to globally exchange tax and financial data to curb global tax evasion. Starting from 1 September 2017, South Africa began sharing information with other countries that have signed the CRS, aiming to enhance transparency and improve tax administration efficiency.
- Every year, financial entities will provide SARS with individual account details, revealing any overseas transactions and offshore investment frameworks.
- Many taxpayers are at risk for failing to disclose the following:
- Rental income earned from lease of foreign property;
- Capital gains on disposal of property;
- Interest and dividends earned from foreign investment;
- Offshore trust distributions to South African beneficiaries; and
- Income for employment services performed abroad
REQUIREMENTS TO QUALIFY FOR A VDP
- It's crucial for a VDP application to adhere to all the stipulations outlined in the Tax Administration Act.
- The requirements for a valid VDP application are that the disclosure must:
- Be voluntary;
- Involve a default which has not previously been disclosed by the applicant or 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; and
- Be made in the prescribed form and manner.
Frequently asked questions
What is the Voluntary Disclosure Programme
It is an opportunity for the taxpayer to make the first move and declare to SARS the non-compliance in an attempt to avoid the penalties and potential enforcement measures that SARS could use if the non-compliance was discovered by SARS first.
Why is there such a thing as Voluntary Disclosure Programme (VDP)
The programme aims to promote coluntary compliance. This will ensure that taxpayers are afforded the right to come clean and sort out their non-compliance. If not utilized then SARS can essentially follow the full might of the law, which is far costlier for the taxpayer.
Who can apply for VDP
Companies, Individuals and Trusts may apply if they qualify.
What are the qualifying criteria for VDP
The following criteria should be met:
- The disclosure must be voluntary.
- The disclosure must be complete in all aspects.
- The disclosure should not involve a default of a similar nature declared within the last five years
- The disclosure should involve behaviour as referred to in the underestimation table of the Tax Administration Act
- The disclosure cannot result in a refund
- The disclosure should be in the prescribed manner
Which taxes does the Voluntary Disclosure Programme (VDP) apply to
The VDP programme applies to all taxes except the customs and excise taxes.
What are the benefits of a VDP
Advantages of VDP participation
By participating in the VDP, taxpayers can step out of the shadows of non-compliance and into the light of accountability and transparency. Implemented by the South African Revenue Service (SARS), it provides a legal avenue for disclosing previously undeclared tax liabilities.
How long does a VDP take
The allocation of a VDP application to the SARS consultant can take months (currently the waiting time is 201 days).
What is the understatement penalty table
Please see the Legal-IN-129-Understatement-penalty-Meaning-of-maximum-tax-rate-applicable-to-the-taxpayer.pdf (sars.gov.za)
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