For many years, the Voluntary Disclosure Programme (“VDP”), has served as a critical mechanism through which taxpayers can regularise historical defaults and restore their tax compliance with the South African Revenue Service (“SARS”). VDP relief has been an important instrument in strengthening the integrity of South Africa’s tax system, serving to encourage transparency, and providing a structured pathway for taxpayers to come clean with SARS.

Yet a significant limitation has lingered in the background. Where a taxpayer sought relief under the VDP, that taxpayer could not simultaneously request remission of interest under the relevant tax Act in respect of the same default, absent clear legislative authority. This position was definitively confirmed by the Constitutional Court in Commissioner for the South African Revenue Service v Medtronic International Trading S.A.R.L (CCT 79/23) [2024] ZACC 26; 2025 (2) SA 337 (CC); 87 SATC 390 (“Medtronic”).

The Medtronic Judgment: Clarity with Consequences

In Medtronic, the Court held that it was impermissible to combine a voluntary disclosure application with a subsequent request for remission of interest under the separate provisions of the various tax Acts. In simple terms, unless the legislation expressly allowed for the two processes to operate together, they could not be merged.

The decision was legally sound, as courts cannot read into legislation powers that are not there. If Parliament has not provided for concurrent relief, the judiciary cannot create it.

However, from a practical and policy perspective, the consequences can be significant. Taxpayers making full and frank disclosure under the VDP could obtain relief from understatement penalties and criminal prosecution, yet remain exposed to substantial interest liabilities, even in circumstances where there may have been grounds for remission under the relevant tax statute.

This creates an imbalance. The VDP is designed to incentivise voluntary disclosure by taxpayers of historic defaults to SARS, receiving indemnity from criminal prosecution for that specific default and a possible reduction of understatement penalties in exchange from SARS. If the financial burden of interest remains unaddressed, particularly in older matters where interest may exceed the principal tax, the programme risks losing part of its effectiveness and appeal to taxpayers.

A Sensible Legislative Intervention

The 2026 Budget proposes a targeted amendment to address this very issue. It is proposed that taxpayers applying for voluntary disclosure relief be expressly permitted to simultaneously apply for remission of interest under the provisions of the relevant tax Act, in respect of the defaults disclosed in the VDP application.

This is not an automatic write-off of interest. Nor does it dilute the principle that interest compensates the national fiscus for the ‘lost’ time value of money. Rather, it restores procedural coherence. It allows the decision maker to consider, within the same factual matrix, whether the statutory requirements for remission of interest are met.

Importantly, the proposed amendment is to take effect from 1 March 2026. The intention is to assist potential applicants going forward, without disturbing existing applications or completed matters.

Why This Matters

From a compliance perspective, this amendment is both pragmatic and principled.

First, it enhances certainty. Taxpayers contemplating voluntary disclosure will know that they can place their full position before SARS in a consolidated manner, rather than navigating parallel processes with uncertain interactions.

Second, it aligns with the broader objectives of the VDP, namely encouraging early, voluntary, and complete disclosure by taxpayers. The removal of procedural fragmentation strengthens the credibility of the regime.

Third, it recognises that interest remission is not a favour, it is a statutory discretion. Where the legislation permits remission in defined circumstances, there is no policy reason to exclude VDP applicants from seeking that relief.

In a tax environment that increasingly emphasises credibility, enforcement, and responsible compliance, coherence in the law is essential. The proposed amendment is a measured correction that reinforces both fairness and administrative efficiency.

Act Before Enforcement Defines the Narrative

The proposed amendment is more than a technical adjustment. It is a strategic opportunity.

Taxpayers with historical defaults often delay action in the hope that exposure will remain undetected or that their tax liabilities will somehow reduce over time. In reality, interest continues to accrue, SARS detection and enforcement mechanisms become more sophisticated, and the risks multiply. Once an audit or investigation has commenced, the door to voluntary disclosure closes.

The anticipated legislative change signals a clear policy intention. Government wants compliant taxpayers. It is prepared to provide structured relief, including a pathway to seek interest remission, but only for those who come forward voluntarily and before they are compelled to do so.

Now is the time to conduct a thorough risk assessment. Identify legacy exposures. Quantify potential tax, penalties, and interest. Consider whether the statutory requirements for remission may be met. Most importantly, act while the initiative remains in your hands.

Voluntary disclosure is not merely about reducing penalties. It is about restoring credibility, protecting reputation, and creating certainty in an environment where regulatory scrutiny is intensifying.

The advantage lies with those who move first.

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