The Voluntary Disclosure Program (VDP) allows taxpayers to correct VAT errors by voluntarily reporting them, which can help reduce penalties from SARS or prevent legal action if SARS discovers the mistake independently. Applicants must meet several criteria, and if approved, SARS will issue a written agreement detailing the relief granted and any outstanding liabilities. The VDP agreement is legally binding, and any breach may result in its revocation.
Resolving VAT discrepancies: Leveraging South Africa’s Voluntary Disclosure Program
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Author: Ivana Picajkić
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Content accuracy validation date:
21.11.2024
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08:08h
The Voluntary Disclosure Program (VDP) provides a way to correct errors in VAT obligations. By voluntarily reporting your error you can potentially lower penalties imposed by SARS or avoid further legal action if they find the mistake on their own.
To apply for the Voluntary Disclosure Program (VDP), a "default" must have occurred. As defined in Section 225 of the Tax Administration Act 28 of 2011 (TAA), a "default" refers to submitting incorrect or incomplete information to SARS, failing to provide the required information, or adopting a tax position that leads to an understatement.
In order to qualify for a VDP application, the following requirements must be met:
- The disclosure must be made freely.
- It must involve a default that has not occurred within 5 years of the disclosure of a similar default.
- It must be full and complete in all material respects.
- It must involve a behavior referred to in the understatement penalty table in Section 223 of the TAA.
- It should not result in a refund due by SARS (if that’s the case it should be rectified using the standard provisions and procedures outlined in the TAA).
- It must be made in the prescribed form and manner.
If SARS approves your VDP application, they will create a written agreement with you. This agreement details the relief provided and any outstanding liabilities to SARS.
It's important to note that a VDP application usually offers relief from:
- Criminal prosecution for tax offenses related to the default,
- Reduced understatement penalties as specified in columns 5 or 6 of the penalty table,
- A complete waiver (100%) of administrative non-compliance penalties, whether already imposed or potentially applicable under Chapter 15 or any tax Act.
However, this relief generally does not cover penalties for late payments or late submission of returns. The VDP agreement is legally binding, and any violation could lead to SARS revoking the agreement.
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