The South African Revenue Service (Sars) Voluntary Disclosure Programme (VDP) is a cornerstone of Sars’ approach to encouraging taxpayer compliance while promoting transparency. Through the VDP, Sars offers taxpayers a structured pathway to disclose previously undeclared tax liabilities, thereby avoiding the severe penalties typically associated with non-compliance, except in instances of gross negligence and intentional tax evasion. The VDP aligns with Sars' strategic objectives, making it both a valuable compliance tool for taxpayers and a key revenue stream. In the 2023/24 financial year, Sars processed 1 475 VDP applications, resulting in agreements valued at R3.4-billion, contributing R3.3-billion in collections.

Expanding the VDP to Crypto Asset Compliance

As Sars intensifies its focus on crypto assets, the VDP becomes even more critical for taxpayers involved in cryptocurrency activities. With over 5.8-million South Africans holding crypto assets, Sars has noted that many have yet to declare their gains, often underestimating the tax implications. As part of its compliance initiatives, Sars is now targeting crypto assets specifically, reflecting a broader mandate to detect and address non-compliance in this growing sector. Sars Commissioner Edward Kieswetter emphasised that “technology has enhanced Sars’ ability to root out non-compliant taxpayers,” highlighting that the tax agency’s actions will extend to crypto holders, making the VDP a crucial opportunity to comply before enforcement escalates.

Strategic Objective 3: Making Non-Compliance Hard and Costly

Sars’ Strategic Objective 3—Detect taxpayers and traders who do not comply, making non-compliance hard and costly—guides its enforcement approach. In enforcing tax and customs law, Sars prioritises fairness while aiming to deter non-compliance by closely monitoring taxpayers’ and traders’ activities. Sars’ enforcement strategy is proportional to the level of non-compliance, ranging from “soft” enforcement methods, such as advisory letters, to “hard” enforcement, including audits and legal action. This continuum reflects Sars' commitment to a balanced approach, where compliance is encouraged but evasion becomes increasingly difficult and costly.

Engaging a Tax Attorney: Essential for Privileged, Professional Guidance

For taxpayers intending to use the VDP process, consulting a tax attorney is highly advisable. A tax attorney can ensure privileged discussions and offer professional assistance throughout the process, helping taxpayers make complete and accurate disclosures to Sars. By leveraging an attorney’s expertise, taxpayers can also navigate complex issues, particularly those involving crypto assets, where tax regulations are continually evolving.

It’s crucial for taxpayers to initiate the VDP process proactively, as eligibility is restricted once Sars has identified the taxpayer for audit. Working with a tax attorney ensures this process is managed efficiently and that taxpayer interests are safeguarded throughout.

Through the VDP and its compliance initiatives, Sars remains dedicated to creating a fair, accessible tax system that fosters transparency. By offering a chance for voluntary disclosure and utilising advanced enforcement mechanisms, Sars upholds its mission to ensure that non-compliance is both hard and costly, supporting South Africa’s fiscal health and promoting a culture of accountability across all taxpayer segments.

Written by André Daniels, Head of Tax Controversy & Dispute Resolution at Tax Consulting SA; and Colleen Kaufmann, Senior Tax Attorney at Tax Consulting SA