Fortunately, the Tax Administration Act 28 of 2011 provides a saving grace to taxpayers who come clean to SARS. This mechanism is called the Voluntary Disclosure Programme (VDP). A VDP application to SARS is the only way to avoid severe penalties, and possibly even prison time.
SARS agrees to grant amnesty from criminal prosecution and to waive all understatement penalties where the taxpayer approaches SARS with a VDP application before notification of audit or criminal investigation—except for instances of gross negligence and intentional tax evasion, where the penalties are charged at 5% and 10% respectively.
A taxpayer’s VDP application must comply with certain requirements:
The disclosure must be submitted before the taxpayer is notified of an audit or criminal investigation by SARS;
Thereafter, should the VDP application be accepted by SARS, then a VDP agreement is concluded between the taxpayer and the SARS Commissioner. Therein, the material facts of the matter are outlined, and a payment plan for any amounts due to SARS is agreed on. In turn, SARS agrees to waive any criminal prosecution and remit any understatement penalties. However, interest is always payable.
Come forward now!
Hopefully, South Africans will take heed of this warning, and a change in tax morality could be sparked. Taxpayers whose tax affairs are in a state of disarray should promptly take action to disclose their default to SARS in the correct manner, and appoint astute tax attorneys to assist with this process. Timing is of the essence as should SARS come knocking before your disclosure, the avenue of VDP is unavailable, and prison time potentially beckons.
WRITTEN BY Andre Daniels AND Richan Schwellnus
This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)