Voluntary Disclosure Programme (VDP)
The purpose of the Voluntary Disclosure Programme (VDP) is to enhance voluntary compliance in the interest of enhanced tax compliance, good management of the tax system and the best use of SARS resources. It aims to encourage taxpayers to come forward on a voluntary basis to regularise their tax affairs with SARS and avoid the imposition of understatement penalties and administrative penalties.
VDP relief is available in respect of all taxes administered by SARS (but excluding duties and levies charged in terms of the Customs and Excise Act, 1964 [the Act]).
A taxpayer’s VDP application must comply with the following requirements:
- The disclosure must be made voluntarily.
- It must involve a default which has not occurred within five years of the disclosure of a similar “default” by the applicant or a person referred to in section 226(3) of the Act.
- The disclosure must be full and complete in all material aspects.
- It must involve a behavior referred to in column 2 of the understatement penalty percentage table in section 223 of the Act.
- The disclosure must not result in a refund due by SARS.
- The disclosure must be made in the prescribed form and manner.
- The disclosure must be submitted before the taxpayer is notified of an audit or criminal investigation by SARS.
The VDP agreement once concluded, will stipulate:
- The material facts of the default on which the voluntary disclosure relief is based.
- The amount payable by the applicant, which must separately reflect the understatement penalty payable.
- The payment arrangements and dates.
- The relevant undertakings by the parties.
The VDP agreement provides the relief for SARS to pursue criminal prosecution for a tax offence arising from the default and impose understatement penalties and administrative non-compliance penalties.
For further info, please refer to the VDP Guide or call the VDP toll free number: 0800864613.
Read more on the SARS website at Voluntary Disclosure Programme (VDP)
Cancellation of Tax Types
A cancellation of a tax type occurs when the tax type is no longer required. This happens when a business ceases trading or when the requirements for registration are no longer met (e.g., the turnover is under a threshold or there are no employees for whom PAYE is required to be deducted). In such cases an application is made to SARS for a tax type to be cancelled.
A vendor’s VAT registration may be deregistered/cancelled by the Commissioner, or on written request by the vendor, in the following circumstances:
- A vendor may apply in writing for deregistration/cancellation of a VAT registration where the value of taxable supplies will be less than the compulsory registration threshold of R1 million in any consecutive period of 12 months.
- The Commissioner may deregister/cancel a VAT registration where –
- the vendor has ceased to carry on the enterprise and will not commence again within the next 12 months
- the enterprise never actually commenced or will not commence within the next 12 months
- the vendor no longer complies with the requirements for compulsory or voluntary registration
- the vendor has failed to furnish a return that is required for purposes of calculating the VAT, or
- the vendor was registered under a voluntary registration and –
- has no fixed place of abode or business
- does not keep proper accounting records
- has not opened a bank account in respect of the enterprise, or
- was previously registered under the VAT Act or Sales Tax Act and failed to perform any duty imposed under those Acts.
Where a vendor has ceased all enterprises, the deregistration/cancellation generally takes effect from the last day of the tax period in which the vendor ceased to carry on all enterprises. However, the Commissioner may determine the effective date to be another date.
How to cancel a VAT registration
- Complete a VAT123e – Application for the cancellation of registration of a person in respect of all his enterprises form.
- Use the VAT123T to apply for the cancellation of a separately registered enterprise.
- Make a virtual appointment via our e-Booking system to facilitate deregistration.
For more information, click here: Cancellation of VAT registration (Deregistration)
As an employer you can cancel a registration for employees’ tax if:
- None of your employees are liable for payment of normal tax and you are not liable for payment of Skills Development Levy (SDL)
- You have ceased to be an employer, or
- Your business branch/division was sold.
How to cancel a PAYE Registration
To cancel a registration for employees’ tax you can:
- Indicate on the final EMP501 reconciliation that you want to cancel your registration for employees’ tax and provide the reason for cancellation.
- Use the cancellation function on eFiling.
- Send a written notification and EMP123/EMP123T form to SARS. You can send the notification and form via email to the region where the entity is registered. The email address can also be obtained on the SARS website.
- To cancel the registration of all businesses, you need to submit the EMP123 form.
- To cancel a separately registered branch or division, you need to submit the EMP123T form.
Corporate Income Tax
When closing a business/company, this means it ceases to operate either due to:
- Deregistration, or
When a business/company deregisters with the Companies and Intellectual Property Commission (CIPC), it implies the business/company is no longer registered and has no legal standing since it’s not doing any business nor has assets or liabilities.
When a business/company undergoes a voluntary or compulsory liquidation (also known as the “winding-up” of a business/company) it involves the process of selling all the assets, paying off creditors, issuing any remaining assets to the main or parent company, and then simply closing the business/company. Liquidation or the “winding-up” of a business/company may happen:
- when a business/company is unable to pay its debts
- as a result of a legal court process
- by application of the creditors
- voluntarily, i.e., applied for by members of a Close Corporation (CC)
- when the business owner decides to do something different, or retires.
What steps should be followed when closing a business/company?
Once a business/company receives confirmation from CIPC they have been deregistered, the registered representative should visit their nearest SARS branch and make sure the business or company is deregistered for all the various types of tax.
Administrative penalties for late submission of tax returns
In tax years prior to 2021 administrative penalties for the late submission of income tax returns were imposed if a taxpayer had two or more outstanding tax returns. With effect from 1 December 2022, administrative penalties for the late submission of tax returns are charged if a taxpayer has one or more outstanding returns in respect of the 2007 to 2020 tax years.
For more information, see the Admin Penalty webpage.
What is a tax crime?
Tax crime manifests in many forms. Here are some key examples:
- People do not declare income when they are eligible for paying tax.
- People lie about their expenses to reduce the tax they pay or to obtain an undue refund.
- People fail to submit a tax return to SARS or fail to truthfully respond to our questions.
- Vendors, whether registered for VAT or not, sometimes charge VAT and do not pay it over to SARS.
- Entities submit fraudulent invoices to pay less tax or obtain undue (fraudulent) refunds (Income Tax and VAT).
- Individuals do not register for tax purposes to evade paying their dues.
- Employers withhold employees’ tax (PAYE) and do not pay it over to the SARS.
Also see What is a tax crime? on the SARS website.