NOW IS THE PERFECT TIME TO PREPARE YOUR VOLUNTARY DISCLOSURE APPLICATION TO SARS
With the announcement of the lockdown by the President, and the restrictions on movement designed to curb the spread of covid-19, most South Africans are confined to their homes and are using this lockdown period to reassess their finances, policies and wills. Perhaps it also time to assess the status of your tax affairs to ensure that it is in order.
With most entities not functioning at optimal level due to the lockdown, SARS though, is an essential service, and continues to nevertheless operate. While we appreciate that SARS has been generous by offering tax reliefs during this lockdown period, we also recognise that the fiscus is short on collection and SARS is unlikely to back down on its efforts to collect more taxes in order to close the tax gap.
In extending an olive branch to non-compliance taxpayers, the SARS Commissioner, Edward Kieswetter has encouraged taxpayers to come forward voluntarily with any unresolved tax related matters in order to remedy any non-compliance which may exist. The Commissioner’s invitation should be heeded urgently, if not, it could in some cases, result in non-compliant taxpayers facing prosecution by SARS.
In light of the above considerations, it is recommended that every taxpayer’s resolve should be to regularise their tax affairs with SARS rather than sitting back and waiting for SARS to take action. By far the most beneficial way of doing this is by following SARS’ Voluntary Disclosure Program (VDP), which is a mechanism that SARS uses to allow non-compliant taxpayers to come forward and voluntarily disclose information previously withheld from SARS.
It should be noted; however, that a taxpayer who has already received notice of a SARS audit is not eligible for the voluntary disclosure programme.
Relief under VDP
If done correctly, the VDP process will result in the taxpayer being granted relief in terms of section 229 of the Tax Administration Act. The relief is that SARS will not pursue criminal prosecution for the tax offence, and remit 100% of both understatement penalties and administrative non-compliance penalties. This relief is also confirmed in writing by virtue of a written agreement concluded between the taxpayer and the SARS Commissioner upon the conclusion of the VDP process.
The VDP process, however, will not result in the remission of tax or interest incurred due to the late payment of tax. Such tax and interest will be payable to SARS in line with the terms of the VDP agreement. It is further worth noting that upon concluding the VDP agreement, taxpayers cannot subsequently apply to SARS for a remission of interest.
Take Away
It is prudent to approach SARS as soon as possible to bring your tax affairs in order and to also benefit from the relief granted by the VDP process. Now is the perfect time gather all the documentation you may need in order to provide full disclosure to SARS. Tax Consulting SA can help you with your VDP application to ensure that it is done correctly. Our team of attorneys will further ensure that your information is protected by legal confidentiality and privilege.
