Final warning for taxpayers

While SARS has improved access to the Voluntary Disclosure Programme (VDP), it remains a legally complex process requiring careful, proactive engagement to avoid severe penalties, reputational damage, or criminal prosecution.

This is according to André Daniels, head of tax controversy & dispute resolution at Tax Consulting SA and Colleen Kaufmann, legal manager of tax and exchange control at Tax Consulting SA.

Daniels and Kaufmann explained that the VDP offers qualified taxpayers a structured, legislated opportunity to correct prior non-compliance.

It is not a loophole or workaround but a legitimate mechanism to encourage voluntary compliance before SARS initiates an audit or investigation.

“Taxpayers who took this route early have protected themselves from reputational harm, potential financial ruin, and, in some cases, criminal prosecution.”

Those who did not now face consequences, including public naming and shaming, civil judgments, and penalties that can reach up to 200% of the original tax debt.

“In more serious cases, individuals have faced prosecution, with imprisonment as a real possibility,” Daniels and Kaufmann said.

They explained that SARS has made the VDP process more accessible for taxpayers acting in good faith. The application system has been digitised and streamlined, and turnaround times have improved.

SARS has also demonstrated a willingness to engage constructively with applicants, provided the disclosure is made voluntarily before SARS begins any inquiry.

However, while the process may appear more straightforward, the legal requirements remain stringent. A taxpayer must be registered and updated with all tax returns, and the disclosure must be complete and accurate.

SARS has successfully invalidated VDP relief where applications were rushed or failed to meet the statutory criteria. As a result, those taxpayers were exposed to both penalties and potential criminal liability.

Act now or face the full weight of SARS

According to Daniels and Kaufmann, many taxpayers fail to appreciate the importance of legal privilege, especially when the risk of criminal sanctions arises.

“In matters where potential prosecution is on the horizon, engaging a tax attorney ensures that communication and strategy discussions are protected by law. This privilege does not extend to accountants or consultants.”

Without it, SARS could access and use sensitive disclosures and planning documents in subsequent enforcement proceedings.

Daniels and Kaufmann stressed that when the stakes include imprisonment, legal privilege is not a luxury; it’s a necessity.

Adding to the challenge for taxpayers is the fact that SARS is better equipped than ever to clamp down on non-compliance.

“SARS has invested significantly in data analytics, automation, and inter-agency cooperation. Audits are no longer random,” Daniels and Kaufmann said. They are precise, data-driven and often highly effective.

Once an audit, investigation, or verification commences, the door to the VDP closes. This is not theoretical. In many cases, SARS has already executed garnishee orders, asset preservation applications, and criminal prosecutions.

“The burden of proof lies with the taxpayer,” they added. “Failure to maintain records, declare all income or keep tax affairs in order places individuals and businesses at real risk.”

“The VDP is one of the few remaining proactive avenues allowing taxpayers to resolve historical non-compliance, avoid excessive penalties, and protect themselves against criminal liability.”

Daniels and Kaufmann stressed that taxpayers should understand that the VDP process is complex and that relying on advisors is crucial.

“Success often depends on engaging the right advisors – particularly those with a legal background who can offer protection through legal privilege.”

The proper support can ensure a well-considered, compliant, and confidential disclosure strategy tailored to your specific circumstances.

“The message could not be clearer: act now or face the full weight of SARS enforcement. For taxpayers suspecting their affairs are not in order, the window to make a protected, voluntary disclosure is closing quickly.”

“Once SARS comes knocking, the options become limited – and the consequences severe,” Daniels and Kaufmann added.