South African taxpayers are encouraged to make use of the lifeline provided by the South African Revenue Service (SARS) to normalise their tax affairs before the taxman comes knocking and legal troubles follows.
At the end of November, SARS announced that it was making its Voluntary Disclosure Programme (VDP) a permanent fixture. Through the VDP, by coming forward willingly, taxpayers will receive help and advice from SARS to expedite compliance and regularise their tax affairs.
According to Andre Daniels, the legal manager for tax controversy and dispute resolution at Tax Consulting SA, taxpayers should not bury their heads in the sand and wait for SARS to come after them if their tax affairs are not in order.
“We can see from SARS’ narrative that the benefits of coming forward voluntarily far exceed the implications of SARS knocking on your door before you approach them through the VDP,” he said.
“The SARS VDP process remains a legal mechanism to protect you against SARS prosecution where you have been non-compliant, but this process must be completed under legal privilege and can only happen before SARS starts their audit/verification or investigation into your affairs.
“We advise taxpayers who have become aware of any non-disclosure of income to come forward and apply for relief through the VDP, in order to avoid the wrath of SARS and to become fully compliant while this window is still open and before SARS comes knocking at your door.”
The critical factor at play is that if SARS discovers non-compliance in tax affairs through its own investigations and actions, the relief offered to taxpayers through the VDP will fall away, and legal processes will follow.
Go to SARS, before SARS comes to you, tax experts warn the group said that SARS has made it clear that it is firmly committed to pursuing voluntary compliance. While voluntary compliance remains the taxman’s first preference, SARS is refining its capability to detect and make it difficult and costly for non-compliant taxpayers.
Taxpayers who have already attracted the attention of SARS due to non-compliance by either being selected for an audit or who have received a final letter of demand will unfortunately not be able to participate in the VDP.
Should taxpayers have failed to declare any income, SARS may impose penalties of up to 200% of the capital tax liability.
To avoid this, errant taxpayers must declare previously undeclared income through the ongoing VDP, which is regulated by the Tax Administration Act.
A major benefit of the relief sought through the VDP is that it covers all tax types:
- Income tax,
- Employees’ taxes, such as Pay-as-You-Earn,
- Unemployment Insurance Fund contributions
- The Skills Development Levy, and
The only taxes that are not covered are customs and excise duties.
“When a taxpayer is granted relief under the VDP, penalties are waived, and the applicant receives amnesty from criminal prosecution. The taxpayer will only be liable for the outstanding tax liability as well as the interest levied thereon,” Tax Consulting said.
“As always, we encourage taxpayers to be proactive regarding their tax affairs, and not to bury their heads in the sand.”