The South African Revenue Service (SARS) created a tax “amnesty” for tax defaults up to 17 February 2010. These applications were submitted between November 2010 to 31 October 2011. This tax amnesty was referred to as “VDP1”. Many taxpayers took the opportunity to “come clean” with SARS with an array of penalties and interest been waived. As per the SARS website, the last eight (8) VDP1 applications will be finalised shortly.
Given the success of VDP1 and in an effort to stimulate an environment of tax compliance, VDP2 was launched in October 2012. Turnaround times for the VDP2 applications (per the SARS website) is expected to be reduced to 31 working days per VDP2 case in the next four (4) months.
However, SARS will have extra staff with audit experience available. They are likely to deploy to these employees in the areas of SARS field audits.
There is merit in taxpayers undertaking health-checks of the potential tax risk areas and to consider approaching SARS with a VDP2 application. The understatement penalties are likely to be reduced to 0% if the taxpayer comes forth rather than SARS discovering the default.