Originally published in Recent Developments in Taxation,
The Tax Administration Bill, 2011, (TAB) which is expected to be
enacted later this year contains a permanent Voluntary Disclosure
Programme (TAB VDP) which provides relief to non-compliant
taxpayers, albeit on less favourable terms than the current VDP
under the Voluntary Disclosure Programme and Taxation Laws Second
Amendment Act No. 8 of 2010.
In terms of the latter, a window period is offered from 1
November 2010 to 31 October 2011, during which non-compliant
taxpayers may disclose possible defaults, and regularise their tax
affairs, while being absolved from penalties, additional tax and
possibly also interest resulting from the non-payment of the tax
In terms of the relief provided for in the TAB VDP, successful
applicants will firstly be pardoned from any criminal sanctions
under a tax act or related common law offence. Non-compliant
taxpayers can furthermore expect a monetarily benefit for
"coming clean" with the SARS, as they will, if
successful, be relieved from additional tax to the extent provided
for in the TAB.
Relief in this regard depends on the degree and level of default
of the taxpayer and whether or not the SARS has embarked on an
audit into the tax affairs of the applicant. Successful applicants
that have remedied their defaults will, in addition, be absolved
from 100% of administrative penalties that will in future be levied
under TAB, save for penalties imposed for the late submission of a
Interest and the actual tax arising from the default (in respect
of which the voluntary disclosure is made) nevertheless remain due
and payable to the SARS.
The procedural aspects of the permanent VDP are similar to that
of the current VDP. In order to qualify for the relief, a
non-compliant taxpayer should make a disclosure to the SARS, which
be voluntary and complete in all material respects;
made in the prescribed form and manner;
relate to a default, which could have resulted in a penalty or
additional tax being levied; and
not result in a refund becoming due by the Commissioner:
If the above minimum requirements are met, the SARS has no
discretion and is obliged to grant the applicant relief. The SARS
however retains the right to withdraw relief, and pursue
prosecution, if it establishes that a taxpayer failed to disclose a
matter that was material for purposes of making a valid voluntary
disclosure. Any such decision by the SARS in this regard is,
however, subject to objection and appeal.
The term "default" is defined to mean the submission
of incorrect or incomplete information to the SARS; or the failure
to submit information; or the adoption of a tax position, which
resulted in an incorrect:
assessment for tax; or
payment of tax by the taxpayer; or
refund of tax made by the SARS.
Although TAB is prescriptive as to the procedure for making a
voluntary disclosure, the SARS has to date not yet released any
prescribed forms or regulations. Presumably the prescribed from
will take on a similar format to the prescribed form applicable to
the current VDP.
Once an applicant qualifies, relief is evidenced by the
conclusion of an agreement between the SARS and the taxpayer
(Agreement) on the proper treatment of the taxpayer's tax
affairs. Such an Agreement should contain the prescribed minimum
information such as the:
the material facts relating to the default;
the tax, interest and where applicable the additional tax that
remains due and payable;
the proposed dates and manner for payment of the amount due to
future treatment of the issue (if relevant); and
undertakings (if any) by the SARS or the taxpayer.
Lastly, in addition to the above, the SARS may issue an
assessment that gives effect to the Agreement, which will not be
subject to objection and appeal.
A non-compliant taxpayer may apply anonymously to the SARS for a
non-binding private opinion relating to his or her eligibility for
relief under the TAB VDP. The opportunity to apply for a
non-binding private opinion is the only safeguard available to
non-complaint taxpayers wishing to regularise their tax affairs
under the VDP.
It is therefore recommended that taxpayers, who are in doubt
about whether they will qualify for the VDP relief, test the chance
of success of their application by making use of the non-binding
private opinion option.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
In response to information provided by FIRS, NSE has sent letters to publicly listed companies, who were purportedly identified by FIRS as non-compliant.
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