The recent challenges faced by taxpayers
The last two years placed a great deal of stress on everyone. In the wake of lockdowns and the subsequent job-losses, South Africans were forced to make difficult decisions. Whether these decisions were fuelled by a need to survive, a consequence of economic collapse, or the harsh reality of death, we must take the time to consider the tax implications it could have.
Numerous expatriates working abroad were either sent home or their foreign employment contracts were terminated. For those with assets or investments in two jurisdictions, this probably created negative tax exposure, or threatened to reveal offshore funds that had previously gone unnoticed by the South African Revenue Service (SARS).
Similarly, the encashing of retirement or pension savings to put food on the table could result in unforeseen taxes, depending on how the fund is being managed. If it was your personal savings, then there would be other tax considerations.
Complex or problematic estates, as well as the subsequent inheritance settlements, could have numerous tax elements if not carefully considered. If there were assets in the estate, which you were ultimately obligated to sell off when your savings dried up, it could result in capital gains tax due to SARS.
Regardless of the hand life has dealt you, SARS has made it clear that they aim to encourage tax compliance through force. The media is riddled with reports of SARS’ pursuit of taxpayers flouting their tax obligations, as well as the repercussions of being found non-compliant. There is, however, a secret weapon for those who are facing a mountain of tax debts.
The Voluntary Disclosure Programme
After its inception from 1 October 2012, the Voluntary Disclosure Programme (VDP) has become an effective way for taxpayers to regularise their tax affairs. While SARS utilises the VDP as a voluntary process to enhance tax compliance, it is possibly the last mode of leniency from the revenue authority before the matter progresses.
Any individual taxpayer or company can qualify to apply for a VDP. However, it is imperative to note that the disclosure of your tax affairs must be done voluntarily. According to SARS’ website it must also involve a default which has not previously been disclosed, or the potential imposition of an understatement penalty in respect of the default.
Prevention is better than cure
Putting your head in the sand and wishing your tax worries away, will not remove SARS from your doorstep once they pick up on your scent. The only advantage you will have when facing off against SARS, is proof that you proactively attempted to disclose or resolve your tax affairs. The first-mover advantage carries incredible weight when engaging SARS.
Whether an untaxed income, undeclared offshore assets, tax debts or even unpaid employee’s taxes, SARS has provided a last chance for taxpayers who are aware that they are non-compliant. Because a VDP offers taxpayers amnesty from criminal prosecution, it is imperative to apply for a VDP before SARS sends out a letter of demand. Once SARS has initiated legal methods to obtain clarity about your taxes, applying for relief through a VDP is no longer an option. It is therefore best to make the first move and to consult a tax professional with a firm grasp of the intricacies of a VDP application.
Need help with your tax matters?
If you’ve been caught off-guard and received a nasty surprise in the form of a large tax debt owed to SARS, perhaps you just realized that you should have declared certain things to SARS that perhaps you weren’t aware off, don’t panic. Our team of technical tax experts have over 17 years of experience and are ready to assist you remain compliant. Speak to us today to enquire about a VDP.