HG Thomson Master Tax Practitioner (SA) (SAIT)

The Finance Minister, Pravin Gordham, announced in the budget speech earlier this year that

SARS would implement a voluntary disclosure program.

give taxpayers the opportunity to regularise their tax affairs (Tax VDP) and/or regularise any

contraventions of the Exchange Control Regulations, 1961 (Regulations) (Excon VDP).

that would trigger additional tax or penalty/interest charges. Defaulting taxpayers, in certain

limited circumstances, may also consider using the voluntary disclosure program in situations

when a current investigation is taking place.

(other than administrative penalties) and interest of up to 100 percent, arising from a previous

default which must have occurred prior to 17 February 2010.

African residents/company/close corporation) to regularise their exchange control affairs, and

provide SARS and SARB with details of foreign assets and/or structures (of whatever nature

excluding bearer instruments) individuals and/or corporate entities to disclose and regularise

their tax and/or exchange control affairs.

and recognises the greater access to information enjoyed by SARS both domestically and

internationally.

If you currently have tax defaults or if have contravened the Regulations and choose not to make

use of the VDP, then the law will take its course. This could mean that SARS will apply various

sanctions, including the payment of outstanding taxes, penalties and interest, and criminal

prosecution. FinSurv could apply various sanctions, including the attachment of assets, blocking

of funds, interest being charged and/or criminal prosecution.

In the event that you have previously made a disclosure under the 2003 amnesty, then you can

apply again under the current VDP?

We at Osiris can play an important role in ensuring the success of a tax VDP or Excon VDP by

assisting clients to make use of the VDP. We will however need to establish and verify clients’

identities and keeping of records in terms of FICA. Our obligation to report suspicious or

legitimate sources.

Osiris can on behalf of an applicant first obtain an indication of the possible relief that may be

granted, by submitting an application that does not reveal any identifying information. Based on

this, SARS may then issue a non-binding opinion indicating whether or not the applicant would

qualify for any relief and, if so, to what extent. However this non-binding opinion is conditional

upon the factual disclosure made, and can only be used as a guideline.

SARS can only then commit to the final granting of any relief in the case of an anonymous

application, after the identity of the applicant has been disclosed, so that all the facts of the

disclosure (more specifically establishing whether there was a pending audit or investigation)

have been verified. The anonymous applicant may decide not to proceed with the application for

relief. Such applicants, however, remain at risk of SARS independently identifying any defaults,

leading to the normal course of events to unfold, which may include penalties, additional taxes

and interest charges, in addition to the criminal law taking its course.

Applicants must complete an application form for relief under the Tax VDP or Excon VDP.

Regarding an anonymous disclosure, the applicant or a duly authorised representative (OSIRIS)

may engage with SARS. In order to support the application, the following information must be

submitted:-

• The name, address (including email), telephone number, identity number, company or trust

registration number, and any identification tax number assigned by SARS to the applicant (if

applicable)

• The address of the applicant’s authorised representative, including telephone and fax numbers

(if applicable)

• The tax year(s), reporting period(s) or tax period(s) involved in the disclosure

• Amount of the disclosure (if applicable)

• Tax type(s)

• Type of return(s) involved (IT type return, VAT, etc.)

• Type of omission or default (understatement of tax; overstatement of refund or any other

non-compliance resulting in outstanding tax)

• Reason for the omission or other non-compliance resulting in outstanding tax

• Primary business activity

• An explanation of how the applicant considers that the requirements have been met.

A tax default means

• the submission of inaccurate or incomplete information to the Commissioner;

• the failure to submit information; or

•assumptions presented to SARS about one’s tax liability, where such submission, nonsubmission,

or assumptions resulted in

(a) the applicant not being assessed for the correct amount of tax;

(b) the correct amount of tax not being paid by the taxpayer; or

(c) an incorrect refund being made by the Commissioner.

Any person may apply, whether in a personal, representative, withholding or other capacity,

for defaults prior to 17 February 2010.

All types of tax administered by SARS are included under the VDP. Some of these are:

Income tax, pay as you earn (PAYE) (employee’s tax), value-added tax (VAT), diesel refunds,

customs duties, excise duties and levies, donations tax, estate duty, mineral and petroleum

resource royalties, royalties, secondary tax on companies (STC), stamp duty, securities transfer

tax (STT), transfer duty, turnover tax and uncertified securities tax (UST).

SARS may accept their applications if their default would not have been detected during the

audit or investigation, and the application would be in the interest of good management of the tax

system and the best use of SARS resources. In these cases, however, they will need permission

from the Commissioner to apply and they will be charged 50 per cent (half) of the interest that

would otherwise be due.

A defaulting taxpayer will be granted relief under the programme if the application meets the

following requirements:

• The disclosure is complete in all material respects and made in the prescribed form and manner

• SARS was not aware of the default, which must have occurred prior to 17 February 2010

• A penalty or additional tax would have been imposed had SARS discovered the default in the

normal course of business

• It would not result in a refund due by the Commissioner.

If SARS accepts that your application is a disclosure that meets the conditions set out in the

legislation, it will be considered a valid disclosure. You will then be able to benefit from the

following relief:

You will not be charged penalties, whether a fixed amount or a percentage-based penalty, with

respect to the disclosure. Penalties for late submission of returns and late payments may,

however, be charged.

50 per cent interest relief for applicants who required permission from the Commissioner to

apply 100 per cent interest relief for all other applicants.

SARS will impose no additional tax.

SARS will not initiate criminal prosecution for any Tax Act offence, or related common law

offences.

Strictly speaking, SARS should go back for as many years as the tax default has occurred.

SARS, however, appreciates that record keeping and other difficulties may arise in doing so.

Bearing in mind the record keeping requirements in the legislation SARS administers and the

objectives of this VDP, if the default is one that involves a small proportion of the applicant’s

income or transactions, SARS will generally not go back further than five years in calculating the

tax outstanding in terms of the Tax VDP.

If the default involves extraordinary income or transactions that occurred more than five years

back, SARS will take the extraordinary income or transactions into account in calculating the tax

outstanding. Thus, by way of example, if an applicant entered into an extraordinary transaction

to evade tax in 2000 and invested the income in a secret offshore bank account bearing nominal

interest, SARS will calculate the tax outstanding on the extraordinary transaction in 2000 and the

interest income from 2005 to 2010. Where an applicant requires further guidance with regard to

this question Osiris can either contact the VDP Unit on your behalf and/or make an anonymous

application.

• Individual, sole proprietor, partnership, deceased estate(s), insolvent estate(s), South African

trust(s), former South African residents, companies and close corporations that have contravened

the Regulations, prior to 28 February 2010; and • South African residents who took funds

offshore illegally and/or who beneficially own any unauthorised foreign assets and/or structures

(of whatever nature, excluding bearer instruments) may apply to the FinSurv (VDP Division).

Under the Excon VDP successful applicants will be regarded as having regularised their

exchange control affairs in respect of the declared value of all unauthorised foreign assets

disclosed in their application. South African residents who have contravened the Regulations are

assured that where a full disclosure is made in the prescribed manner and administrative relief is

granted by FinSurv (VDP Division), no further action against the South African resident

involved in such contraventions will be taken or initiated by FinSurv.

An applicant will be granted relief for VDP, if he/she/it meets the following requirements:

• The applicant must have contravened the Regulations prior to 28 February 2010

• The disclosure is complete

Applicants who are granted administrative relief in respect of unauthorised foreign assets and/or

structures (of whatever nature, excluding bearer instruments) may have to pay a levy on the

market value thereof.

• The amount levied in the case of an individual is reduced by R4 million of the foreign

capital allowance or any remaining portion thereof, and may not be reduced by any fees

or commissions.

The levy must be paid within three months of the date of approval of the application,

.

The following supporting documentation must accompany the applicant’s original signed

application form:

Valuation certificate from a foreign valuator, as at 28 February 2010