Most Read Contributor in South Africa, September 2016
some practical updates
We are heading into the last month for taxpayers to avail
themselves of the VDP provided for in terms of the Voluntary
Disclosure Programme and Taxation Laws Second Amendment Act
("the VDP Act"). The current VDP regime is due to come to
an end on 31 October 2011. As at the date of this article, there
has been no indication from the South African Revenue Service
("SARS") of any extension of the period in which a VDP
application can be submitted under the current legislative
As a reminder, in terms of the current VDP regime, provided the
requirements in terms of the VDP Act are met, the relief can be
summarised as follows:
Where there is no awareness of an audit/investigation (section
3(1) of the VDP Act), there is 100% relief for interest and
penalties and no criminal prosecution will be instituted.
Where there is an awareness of an audit/investigation and
subject to two further requirements (section 3(2) of the VDP Act),
there is 100% relief for penalties and 50% relief for interest and
no criminal prosecution will be instituted.
An anonymous approach can also be made in terms of the current
VDP regime (section 5 of the VDP Act) which results in a
non-binding private opinion being issued by a SARS official from
the VDP Unit. Even though the SARS official's opinion is
non-binding, receiving a positive opinion should provide a good
indication of how a taxpayer's VDP application will be treated
and the relief which will be applicable thereto. Our practical
experience in dealing with anonymous applications is that a quick
response is forthcoming and that SARS officials who are dealing
with such applications are helpful in respect of queries and
generally easily accessible. A case number is allocated to the
anonymous application when the opinion is given and it is our
understanding that when an application is resubmitted on a named
basis, the same official will be allocated that case as one has to
make reference to the particular case number in the named
At this late stage with the deadline looming, should a taxpayer
still wish to make an anonymous VDP application, this should be
submitted as soon as possible so that there is sufficient time to
make a decision as to whether to submit a named VDP application
before 31 October 2011. In this regard we understand that there is
currently a backlog in respect of the VDP Units' review of VDP
applications and accordingly, there will be quite a wait for
taxpayers submitting VDP applications in the last month of the
programme. As stated above, there appears to be a different channel
which appears to fast track the anonymous applications.
Noting that the VDP provided for in the VDP Act is about to come
to an end, it is worth noting that in terms of clauses 225 to 233
of the Tax Administration Bill ("TAB"), a permanent
legislative framework for voluntary disclosure applicable across
all tax types, excluding customs and excise, is proposed. In terms
of the "Memorandum on the objects of the TAB" that was
issued together with the TAB, 'The main purpose of such a
framework will be to enhance voluntary compliance and is in the
interest of the good management of the tax system and the best use
of SARS' resources.' The permanent VDP framework in
the TAB will not provide interest or exchange control relief, but
proposes to provide for relief from penalties (100% relief from an
administrative non-compliance penalty and partial relief from an
understatement penalty which is currently known as additional tax)
and criminal prosecution.
Regarding the time line of the promulgation of the TAB, it can
be noted that the third draft was released in June 2011 and an
opportunity was granted to make submissions before 12 August 2011.
Public hearings were held on 16, 17 and 19 August 2011. According
to our most recent information in this regard, National Treasury is
supposed to respond to the submissions on 21 September 2011. The
TAB is expected to become operative in early 2012, so watch this
space for details.
Accordingly, between 31 October 2011 and the date upon which the
TAB takes effect, there is currently no provision made for a VDP.
Taxpayers who have missed the opportunity to come forward in order
to regularise their tax affairs by 31 October 2011 will be open to
attack by SARS under the normal (and often harsh) provisions of the
various tax Acts. As is clear from the above, even though there
will, from the time when the TAB is enacted, be a permanent VDP
legislative framework in place, any relief received in terms of the
new proposed VDP will be less favourable than is currently on
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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