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Sars surges ahead with voluntary disclosure overhaul, but is it enough?

End-to-end administrative function within this unit is on the cards.
Waiting for the outcome of a ruling application from Sars's legal division before making a disclosure means the disclosure may no longer be seen as ‘voluntary’. Image: Shutterstock

The South African Revenue Service (Sars) has mostly cleared the backlog of applications for the disclosure of offshore assets and income under the Special Voluntary Disclosure Programme (SVDP) and the normal Voluntary Disclosure Programme (VDP).

Sars recently held a meeting with interested stakeholders from industry and tax practitioners to discuss the ongoing challenges practitioners and taxpayers are experiencing. It advised of plans to implement an “end-to-end” administrative function within the voluntary disclosure unit.

This is expected to improve response times, assist with processing requests for payment plans, expedite the raising of assessments and improve communication regarding debt collections, which is to be welcomed.

Background

The VDP is a permanent fixture and is administered under the Tax Administration Act (TAA). For the period October 1, 2016 until August 31, 2017 the SVDP was introduced to cater for non-compliant taxpayers, giving them an opportunity to regularise their unauthorised foreign assets and income by voluntarily disclosing this information.

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Individuals and companies could apply during the SVDP window period. The SVDP was meant for individuals and companies that did not in the past disclose tax and exchange control defaults in relation to offshore assets.

Taxpayers who missed this deadline can still make use of the normal VDP process to disclose offshore income.

VDP applications can be made via eFiling and branch offices. However, the prevailing Sars Covid regulations should be taken into account.

Turnaround times

Any errors made in the application will result in a rejection by the system, which will result in delays and additional interest.

According to Sars, 89.8% of the old inventory as at April 1, 2020 has been finalised. The balance of these cases (pre April 1, 2020) are delayed due to additional information and documentation still required.

Around 59% of cases received since January 2021 have been finalised, with an average turnaround time of 31 days.

Webber Wentzel partner Joon Chong and senior associate Wesley Grimm observed that progress in the Voluntary Disclosure Unit in reducing the backlog of cases is highly commendable.

This unit is prepared to engage directly with taxpayers to alleviate delays caused by not submitting the correct information. About 90% of pre- April 2020 cases concern individual income tax matters.

Taxpayers are encouraged to contact the case evaluator directly if information has been provided and but they have not heard from the Voluntary Disclosure Unit within 30 days of submission.

Submitting an application

The current VDP mechanism should deal with unintended errors and system calculations.

A SVDP or VDP disclosure will only be valid if all the necessary information has been submitted.

Full and complete disclosure of material facts relating to a SVDP or VDP disclosure includes the full disclosure of the source of funding of the assets and investment accounts, which remains a contentious point for SVDP applications.

The Voluntary Disclosure Unit has indicated that it will accept estimates of tax liabilities if the taxpayer is still in the process of calculating the tax defaults.

Capital losses going back more than three years

Sars has taken the view that capital losses dating back more than three years will not be taken into account, even if the overall effect is that the taxpayer is still liable for additional capital gains tax in multiple years.

“Capital losses are not considered defaults and does not result in an understatement. VDP may not override provisions of section 93 of the TAA regarding reduced assessments and section 99 in so far as prescription is concerned,” the revenue service says.

Section 93 sets out the requirements that govern a reduced assessment and Section 99 sets out the period of limitations for issuance of assessments.

The same position is taken for input value-added tax (VAT) claims against output VAT defaults.

Input VAT claims more than five years from time of supply will not be taken into account.

Examples of the above interpretation will be given in the updated guide.

Need for clarity

According to Chong and Grimm, some of the cases that have not been resolved have been due to taxpayers waiting for the outcome of a ruling application from Sars’s Legal and Policy Division (LAPD).

One of the key requirements of submitting a VDP application is that the disclosure must be “voluntary”. It is important to note that a voluntary disclosure application should be submitted before submitting the ruling application to LAPD.

A VDP application submitted after a ruling outcome that is not in the taxpayer’s favour is no longer considered voluntary by the Voluntary Disclosure Unit and will be rejected.

The existing guide for VDP can be accessed on the Sars website here.

Sars has committed to introducing a Service Charter within the VDP space and publishing an updated guide by January 2022. Taxpayers and practitioners will have the opportunity to comment on the draft guide before it is finalised.

Read: Sars hones its relationship with the rich and the super-rich

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Dear Barbara – a user question- it is good to see SARS getting their house in order. On the other hand what should a small business do when SARS is “AT IT” again. They are withholding VAT refunds. Our business from time to time has a month of refund. Over the past 2 years SARS just ignores any month with a refund due. These are small numbers but they add up.
Then when the EMP201 for under R10 000 is late one gets a call to ask where the submission and payment is within 10 days of due date.

I don’t know, the thought of paying 45% of my bonus to SARS and knowing that some half illiterate local councilor somewhere in Limpopo is going to misuse it along with tax money from other people to buy himself a new Land Cruiser and his wife a new Mercedes, really irritates me.

They must concentrate on the basics.

Its been weeks to get a tax clearance certificate out of them. Nothing!!

Forget about the smart stuff man!!! You are not smart! Like the rest of this anc infested useless government nothing works except the theft and extortion parts!!

Tax avoidance and evasion are a moral obligation now. Period

End of comments.

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