The Special Voluntary Disclosure Programme (SVDP) Explained
03 October 2016
With South Africa becoming a signatory of the Standard for Automatic Exchange of Financial Account Information (“AEoI”) in tax matters, also known as the Common Reporting Standard (“CRS”) and the automatic exchange of information by South Africa from September 2017, the Special Voluntary Disclosure Programme (“SVDP’) provides a last chance for taxpayers to regularise their tax and/or exchange control affairs. If SARS beats the taxpayer to this information, the taxpayer forfeits the right to claim relief in terms of voluntary disclosure. The consequences of this may be far reaching given the dispensation that might otherwise have applied when SARS was seeking to extend the tax base by providing incentives for taxpayers to come forth and regularise.
Still unsure? Here are the benefits of applying for the SVDP:
- Capital that gave rise to the initial investment is not subject to income tax, donations tax and estate duty.
- 50% of the highest value of the aggregate of all assets situated outside South Africa (between or deemed to be between) 1 March 2010 and 28 February 2015 that were derived from undeclared income will be included in taxable income and subject to tax in the 2015 tax year. The value is the market value as determined in the foreign currency translated to South African Rand at the spot rate at the end of the tax period in which the highest value fell. This results in pegging the potential exposure, thereby assisting with cash flow and cost projections for taxpayers.
- The undeclared income that originally gave rise to the foreign asset will be exempt from income tax, donations tax and estate duty liabilities arising in the past;
- Investment earnings and other taxable events prior to 1 March 2015 will be exempt (i.e. interest income);
- Interest on tax liabilities arising from the disclosure will only commence from the 2015 year of assessment;
- No understatement penalties will be applicable;
- As is currently the case in the existing permanent VDP, SARS will not pursue criminal prosecution for a tax offence where an application under the SVDP is successful.
- More specifically, the SVDP does not place an obligation for a taxpayer to apply for both, tax and exchange control relief. A taxpayer may opt to regularise his/her exchange control position by availing of the relief afforded in terms of the SVDP and may elect to apply to regularise his/her tax affairs in terms of the application of the permanent VDP contained in the Tax Administration Act No. 28 of 2011.
- From an exchange control perspective, the SVDP also provides opportunities for South African residents subject to exchange control regulation to regularise their positions where funds were externalised in the absence of obtaining the necessary exchange control approvals and clearances.
We put together a VDP Guide to provide you with an understanding of the permanent VDP, SVDP and some of the benefits and implications of availing of such relief. Included in the guide are thought leadership articles from our experts to give further insight on the matter.
Access the VDP Guide here
Anyone requiring more information or assistance in making a special VDP application should contact BDO on firstname.lastname@example.org.
Read more BDO Insights