A guide to declaring offshore assets and income with SARS and SARB
Special Voluntary Disclosure Programme
The Deloitte VDP team has developed a short guide that highlights key considerations with regards to the taxes applicable, sanctions for non-compliance, proposed reliefs for taxpayers and answers to key questions pertaining to the application process for taxpayer’s undisclosed offshore assets and income.
What is the special Voluntary Disclosure Programme (VDP)
The special VDP was introduced by the South African Revenue Services (SARS) in order to provide the opportunity for non–compliant taxpayers with undisclosed foreign assets and income a final opportunity to regularise their tax affairs. Natural persons (including deceased estates of natural estates), close corporations and companies who are South African residents are eligible to be a part of the special programme.
The VDP 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 other administrative penalties
The duration of the special VDP will commence from the 1 October 2016 until 31 March 2017.
Some of the sanctions that would apply if your non-compliance is detected by SARS or SARB are:
• 10% late payment penalty and 10% to 200% understatement penalty.
• Interest on outstanding payments
• Could lead to potential criminal prosecution.
• A 10% to 40% penalty which is based on current value of the authorised asset, if you come forward outside of the special VDP.
Some relief that is proposed in the VDP Programme are:
• Only 50% of the total amount used to fund the acquisition of the offshore asset will be subject to tax.
• All income and gains generated before 1 March 2010 will be exempted from tax as SARS will seek to tax investment returns on offshore assets.
• Any investment income generated after the 1 March 2010 will be subjected to tax.
• If the VDP application is successful then no understatement penalties will be levied and no criminal prosecution will be pursued.
• As from 29 February 2016, unauthorised foreign assets will have a 5% penalty on the current value of the asset if the asset is repatriated to South Africa, and 10% if the assets are kept offshore.
• A 2% penalty will be added if the original penalty is not paid from foreign source funds.