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Do you know how a VDP can save your business 200% in penalties?

by , 19 July 2013
Did you know that there's a permanent voluntary disclosure programme (VDP) under the Tax Administration Act, aimed at encouraging you to get your tax affairs in order? Read on to discover how a VDP can save your company up to 200% in penalties.

According to the SARS, the purpose of the VDP is to enhance voluntary compliance in the interest of good management of the tax systems and the best use of SARS's resources.

Here's how a VDP can save your business 200% in penalties

The Tax Administration Act takes away the discretionary powers of SARS to charge additional tax of up to 200%. Instead, it prescribes understatement penalties applicable to the following:

  • Substantial understatements;
  • Care not taken in completing a return;
  • No reasonable grounds for actions or non-actions by the vendor;
  • Gross negligence; and
  • Intentional tax evasion.

The penalties for the above vary from case to case, but, if you apply for VDP before SARS notifies you of an audit, then in some cases the penalties are NIL or limited to 10%, says the Practical Vat Loose Leaf Service.

Who qualifies for VDP?

You can apply for a VDP through e-filing if you're not aware of a pending audit or an investigation into your company's affairs or if you're under audit or investigation, where such audit or investigation hasn't been finalised.

If an audit or investigation has already begun, the relief may be limited to any default which SARS may not have detected during the audit.

You're regarded as having knowledge of a pending audit or investigation if you, your representative, a director, shareholder, partner, trustee or agent are aware of such an audit or investigation.

Remember, a senior SARS official must inform you of whether you qualify for voluntary disclosure relief or not.

What are SARS' obligations to you when the VDP process is complete?

After you've applied for VDP and the VDP processes have been concluded, SARS must:

  • Not pursue criminal prosecution arising from the 'default' or a related common law offence;
  • Grant certain relief for any understatement penalty;
  • Grant 100% relief for an administrative noncompliance penalty. But excluding a penalty imposed for the late submission of a return or late payment of tax.

There you have it. Apply for a VDP to ensure you're always on the right side of the law.

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