Where a taxpayer wishes to “come clean” as it were, the VDP process involves the following:
- Submission of the VDP application to SARS.
- Evaluation by the SARS VDP unit to assess whether the applicant in question meets the requirements of the VDP. In performing this evaluation, SARS will assess whether:
- The disclosure is voluntary.
- The default, which is the subject of the disclosure, has not occurred within a 5-year period of a former VDP declaration.
- The disclosure is complete.
- The behaviour involved is contemplated in column 3 of the understatement penalty table.
- The disclosure is made in the prescribed form and manner.
- Signature of the VDP agreement, provided 2 above is satisfied.
The VDP is generous to taxpayers in that it protects taxpayers from criminal prosecution and payment of most penalties, which would otherwise be enforceable by SARS. In recent years, however, the VDP unit has become increasingly strict in the evaluation of whether the disclosures in question are in fact voluntary, with SARS now seeking to clarify when the VDP will not be available.
If you have been given notice by SARS of an audit or criminal investigation into your affairs pertaining to the default matter, and in order to avoid prosecution, you seek to invoke protection of the VDP, your default will not qualify for VDP protection. It must be unlikely that (in the case of an audit or investigation), SARS will discover the default and that your disclosure is therefore in the interest of good management of the tax system for your disclosure of the event in question to be protected under the VDP.
The relief granted under the VDP is highly beneficial to taxpayers but must meet the requirements set out by SARS for protection to apply. Taxpayers are advised to reach out to their MMS tax consultant for professional advice before entering a VDP process with SARS, to ensure the correct steps are followed for the protection to apply.
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