SARS gives South Africans with old tax debts a break

South Africans with historical tax defaults could have a new opportunity to regularise their affairs if proposed changes to the Voluntary Disclosure Programme (VDP) are enacted.

The 2026 Draft Tax Administration Laws Amendment Bill proposes allowing SARS to remit interest at the same time as approving a VDP application in appropriate circumstances.

This would be a significant change to how the programme operates and could make voluntary disclosure more attractive to taxpayers with large historical tax liabilities.

This is according to Tax Consulting South Africa’s Team Lead of Expatriate Tax, John-Paul Fraser, and Head of Tax Controversy & Dispute Resolution, André Daniels.

They told Daily Investor that the proposed amendment follows an important judgment by the Constitutional Court. “The proposed amendment effectively addresses that legislative gap,” they said.

In the Medtronic case, the Constitutional Court confirmed that SARS had no legal power under the existing legislation to remit interest as part of the VDP process, even where doing so would promote voluntary compliance.

If enacted, taxpayers who successfully apply for VDP relief will be able to request remission of interest at the same time, rather than first settling the tax debt and then pursuing a separate remission application.

“That represents a fundamental improvement in how the VDP operates and significantly enhances its attractiveness as a compliance mechanism,” Fraser and Daniels said.

The proposed amendment will primarily affect taxpayers with historical tax defaults who have come forward under the VDP from 1 March 2026.

It is particularly important for those whose debts involve offshore assets, historical non-disclosure, trusts, complex corporate structures, or legacy compliance failures spanning several years.

In many of these cases, the accumulated interest is potentially the largest component of the liability, sometimes even exceeding the underlying tax itself.

The ability to seek simultaneous interest remission could materially reduce the financial barrier to voluntary disclosure.

The importance of the new VDP rules

Fraser and Daniels warned that taxpayers should not simply assume that the proposed change will automatically reduce their liability.

“Instead, they should proactively review any historical tax exposures and determine whether they may qualify for VDP relief once the legislation is enacted,” the tax experts said.

“Importantly, each matter will still require a proper legal assessment, as remission of interest is not automatic and will depend on the relevant statutory requirements being satisfied.”

The proposed amendment could be particularly important for taxpayers who have delayed regularising historical defaults because of the potentially crippling interest burden.

“For taxpayers who have delayed regularising historic defaults because of the potentially crippling interest burden, the proposed amendment may present a far more commercially viable opportunity to become compliant,” they said.

The proposed change is also significant because it reflects a broader shift in the way South Africa approaches tax administration. The Treasury has continued to refine legislation in response to important court decisions.

The VDP amendment is an example of the government responding to a legislative gap identified by the courts rather than simply expanding SARS’s enforcement powers.

The proposed VDP interest remission amendment is therefore more than a technical legislative correction, Fraser and Daniels said.

“It restores the original policy objective of the VDP by ensuring that taxpayers who voluntarily disclose historical defaults are not discouraged by disproportionate interest liabilities,” they explained.

If enacted, the change could encourage greater participation in the programme, improve overall compliance and ultimately increase revenue collection.

At the same time, they stressed that taxpayers with historical tax exposures should not wait until the amendment is enacted before reviewing their affairs.

A proper assessment of outstanding tax obligations, the potential interest liability and eligibility for VDP relief can help taxpayers determine whether voluntary disclosure is a viable option.