If there’s one thing that the South African Revenue Service (SARS) wants to do, it’s make taxpayer compliance as easy as possible. With tax compliance being key to its successful revenue collection, SARS offers non-compliant taxpayers the opportunity to come clean about their tax irregularities, and rectify their compliance status. Unfortunately, there are still many tax practitioners and taxpayers who remain unaware of the SARS Voluntary Disclosure Programme (VDP) despite the fact that this tax relief has been available since 2011. So, what is the SARS Voluntary Disclosure Programme, and who might benefit from such a South African tax relief? Let’s take a look at the advantages the SARS VDP offers for South Africans living abroad.

What is the SARS Voluntary Disclosure Programme?

The VDP is a program offered by SARS that allows taxpayers to come into compliance with their tax obligations without facing criminal prosecution or penalties. The VDP is a proactive solution, meaning that taxpayers must voluntarily disclose any instances of tax payment defaults or non-compliance. Simply put, The VDP is a tax relief programme for non-compliant South African taxpayers to come straight on any sketchy tax issues.

Why does SARS tax compliance matter if you live overseas?

South Africa has a residence-based system of taxation. This means that tax residents (regardless of where they live) will be taxed on their income in South Africa, regardless of where it was earned.

Who is a tax resident of South Africa?

A tax resident is someone who meets either one of SARS’ two tests for residency. However, just because you meet neither the requirements of the physical presence or ordinary residence tests, doesn’t mean you automatically stop being a tax resident. In fact, until you have officially notified SARS of your cessation of tax residency, and they have officially acknowledged your change in tax status to non-resident, you are by default still considered a South African tax resident.

Expats: Clarify your SARS tax compliance status

What does this mean? Basically, if you’ve been living and working overseas without having followed the process of tax emigration, you could possibly have a tax obligation back in South Africa that you’ve overlooked. Tax non-compliance is not something to be downplayed. The Tax Administration Act of South Africa (TAA) outlines the penalties for non-compliance with tax laws. The penalties can be severe for taxpayers who fail to comply with their tax obligations.

Some of the key provisions of the TAA relating to non-compliance include:

1. Failure to submit tax returns: Individuals who fail to submit their returns on time may be liable for a penalty of up to 20% on the tax outstanding.
2. Failure to pay tax: Individuals who fail to pay their taxes on time may be liable for a penalty of up to 20% of the tax due.
3. Fraudulent or negligent tax evasion: Individuals who engage in either type of tax evasion may be liable for a fine of up to R10 million, up to ten years imprisonment, or both.
4. Failure to comply with a SARS notice: Individuals who fail to comply with a SARS notice may be liable for a penalty of up to R100,000.

When considering the SARS Voluntary Disclosure Programme, please bear in mind that:

• Penalties for non-compliance are significant, and can have a lingering impact.
• The TAA is a complex piece of legislation, and SARS has a number of tools and tricks when it comes to investigating and enforcing compliance, including audits, summonses, and criminal prosecutions.

The facts about the SARS Voluntary Disclosure Programme:

• The programme is a safe space to disclose under-declared income or rectify any understatement of any tax liabilities.
• It is regulated by the Tax Administration Act of South Africa (TAA).
• The VDP is available to all taxpayers, including individuals, companies, and trusts.

To be eligible for participation in the VDP, taxpayers must meet certain requirements, including:

1. The tax non-compliance must be disclosed voluntarily
2. The tax non-compliance must be disclosed in full and accurately
3. The tax non-compliance must be paid in full with interest and penalties
4. The taxpayer must agree to cooperate with SARS in any investigation or audit.

If a taxpayer meets the requirements for the VDP, SARS will waive all criminal prosecution and penalties for the disclosed tax non-compliance. Taxpayers will only be required to pay the outstanding tax, interest, and penalties.

How do you start the Voluntary Disclosure Programme with SARS?

As with everything else, the process is kicked off with a form for you to fill out. The VDP01 form serves as the application that you must duly complete and submit to SARS should you intend to partake in the VDP.

This VDP01 form will require the following information about your tax non-compliance:

1. The specific nature of your tax non-compliance
2. The outstanding amount of taxes owed by you
3. The time frame during which the tax non-compliance happened
4. Any steps you might have taken to address your tax non-compliance

The VDP01 form must be signed and submitted along with supporting documentation, such as:

1. Unfiled tax returns
2. Incorrectly filed tax returns
3. Proof of outstanding payments
4. Evidence of attempts to rectify the tax non-compliance

If SARS approves the VDP01 form, you gain access to a number of tax relief advantages, such as:

• Exemption from criminal prosecution: Full disclosure of tax non-compliance and payment of all outstanding taxes, interest, and penalties can lead to SARS waiving criminal prosecution.
• Penalty waiver: SARS can waive penalties linked to the disclosed tax non-compliance.
• Structured payment arrangement: SARS could allow you to establish a repayment plan for outstanding taxes, interest, and penalties.
• Interest exemption: If you settle all outstanding taxes, interest, and penalties within 30 days from your VDP application date, SARS will not impose interest charges.

The VDP01 form is a vital piece of paperwork for taxpayers currently trapped in a web of tax non-compliance, signaling the first step in the VDP participation process. This opens the door to mitigating the severe repercussions of criminal prosecution and penalties as a result of tax non-compliance.

FinGlobal: SARS tax compliance specialists for South African expats

With SARS clamping down on non-compliance, it’s best to come clean as quickly and cleanly as possible, before it’s too late. If you are a South African living abroad, it’s recommended that you clarify your tax status with SARS urgently, to ensure you’re on the right side of tax law and assess whether you need to make use of the SARS Voluntary Disclosure Programme to correct your non-compliance.

To make use of our free, confidential SARS tax assessment, leave your contact details in the form below and we’ll be in touch. Alternatively, you can send an email to info@finglobal.com regarding your South African expat tax questions.