Hurry before your tax sun goes down
The Voluntary Disclosure Programme ("VDP") is one relief measure announced by the Minister of Finance in the 2010 budget speech. The objective of this programme is to assist taxpayers with an opportunity of disclosing their defaults without harsh tax consequences and also avoiding contraventions of the Exchange Control regulations. This window period of disclosure was opened on 1 November 2010 and will be closed on 31 October 2011.
The VDP operates on the basis of full disclosure on the part of the taxpayer. Once the taxpayer makes full disclosure of any income not disclosed in the past and of any deductions that were claimed illegally, the Commissioner will first consider the validity and extent of the disclosure and secondly if satisfied, waive the amount of penalty and interest that would otherwise be expected to be paid by the taxpayer. The liability resulting from the additional income and the reversal of deductions previously claimed will still have to be paid by the taxpayer.
The VDP is a globally accepted programme for tax collection and covers all the taxes administered by the Commissioner for the South African Revenue Service. These taxes include income taxes such as the company taxes, secondary-tax-on-companies and donations tax, carbon emission tax, employees' tax, value-added-tax (VAT) and even Customs and Excise tax.
The VDP covers the period before 17 February 2010. The 17th of February 2010 is the date on which the 2010 national budget was presented by the Minister of Finance. It was in this national budget speech that among others, the VDP was announced and the effective date set as the the 1st of November 2010. This means that all taxes that were not adequately accounted for by taxpayers in the period before 17 February 2010 may now be disclosed in full by taxpayers with the result that all that taxpayers will be liable for to SARS will be the tax itself and not the penalty and interest.
Once a full disclosure is made to SARS, the following form of relief may be granted to the taxpayer:
Taxpayers often become uncertain as to the effective date of some transactions resulting in the non-payment of related taxes at the time the second provisional tax return (IRP6) is submitted and only to disclose and make payment with the submission of the final IT14 tax return. For example, where suspensive conditions relating to the disposal of a capital asset are only met after the year-end and after submission of IRP6, the related capital gains tax should only be accounted for in the following period and not in the current period IT14.
In some instances, the preparers of accounting records to be used for tax purposes are not certain as to when the transaction is deemed to have taken place. It may be ascertained only after the IRP6 is submitted that in fact the related tax was supposed to have been paid at the time the IRP6 was submitted. The payment of such a tax at the time of the submission of IT14 may result in SARS treating this as a late payment of tax and consequently imposing interest on the taxpayer. This type of interest will not be waived by SARS through the VDP operation.
It is important for taxpayers to perform a self-audit to see if there is any income that was never disclosed to SARS or any expenses that were illegally claimed as deductions in the past through the tax returns submitted. The VDP can only be applied to any tax defaults committed before 17 February 2010.
The VDP form is available on the SARS website and must be completed and submitted to SARS on or before Monday 31 October 2011. Any tax defaults that took place on or after 17 February 2010 may be governed by the permanent voluntary disclosure programme provided for in section 225 to 233 of the draft Tax Administration Bill once passed as an act.
