Since South Africa introduced the principle of worldwide taxation in 2001, a number of so-called tax amnesty programmes have seen the light of day. A number of these amnesty programmes were focused on encouraging South Africans to declare and regularise their offshore income and assets, including the 2003 tax amnesty and the special voluntary disclosure programme (SVDP), which was in place between 1 October 2016 and 31 October 2017. A more permanent fixture in this regard has been the voluntary disclosure programme (VDP), which came into effect on 1 October 2012 and is contained in Chapter 16, Part B of the Tax Administration Act 28 of 2011 (TAA).
Under the VDP, any default committed in respect of any tax, except customs and excise taxes, can be declared, with a successful VDP application resulting in the following tax relief being granted to the applicant:
- An agreement by SARS not to pursue criminal prosecution for tax offence arising from the default declared in the VDP application;
- Relief from understatement penalties that would have arisen from the default; and
- 100% relief in respect of an administrative non-compliance penalty that was or may be imposed under Chapter 15
of the TAA or a penalty imposed under a tax Act, except a penalty imposed for the late submission of a return.
Examples of non-administrative compliance penalties are penalties relating to the underpayment of employees tax or provisional tax.
In practice, the successful VDP applicant will therefore only need to pay the tax that becomes payable pursuant to the declaration of the default and any interest imposed in respect of such tax.
In the 2021 Budget, it was announced that the VDP provisions will be reviewed in 2021 to ensure that they align with SARS strategic objectives and the policy objectives of the VDP.
The 2021 Budget does not indicate exactly what the review will entail, but it is hoped that the review will result in certain changes being made to the VDP provisions in the TAA and that this will not spell the end of the VDP.
It is interesting to note that this announcement of the review arrives on the back of the following happening in the last 12 months:
- In June 2020, SARS facilitated a workshop with tax practitioners during which practitioners were given an opportunity to raise some of the challenges theyve encountered with the VDP process and to raise their concerns, including regarding SARS interpretation of the VDP provisions;
- On 25 August 2020, the Gauteng Division of the High Court, handed down judgment in the matter of Purveyors South Africa Mine Services (Pty) Ltd v CSARS  ZAGPPHC (25 August 2020). In this matter, the court was called on to interpret the voluntariness requirement in section 225 of the TAA and held that in the circumstances of that case, the voluntariness requirement had not been met by the taxpayer; and
- In Medtronic International Trading SARL v CSARS (33400/2019) ZAGPPHC (15 February 2021), it was held that even though the VDP provisions in the TAA did not grant relief in respect of interest on the additional tax payable pursuant to the successful VDP application, it does not prohibit a successful VDP applicant from requesting the remittance of the It is important to note that the judgment dealt specifically with a request for remission of interest in terms of section 39(7) of the VAT Act, pursuant to the declaration of a VAT default under the VDP.
It is hoped that the review process will provide tax practitioners and the public with a further opportunity to engage meaningfully with both SARS and National Treasury, with the result being a VDP process and legislation that gives effect to its purpose.
Author: Louis Botha