The Voluntary Disclosure Programme: How It Reduces SARS Penalties

What Is the Voluntary Disclosure Programme?

The Voluntary Disclosure Programme (VDP) is a mechanism under Part B of Chapter 16 of the Tax Administration Act (Sections 225–233) that allows taxpayers to voluntarily disclose tax defaults to SARS in exchange for significant penalty reductions.

The VDP is primarily aimed at reducing understatement penalties — the penalties imposed when SARS determines that a taxpayer has understated their tax liability.

How Much Can the VDP Save You?

The penalty reductions through the VDP are substantial:

For example, if you have a gross negligence understatement of R500,000, the standard penalty would be R375,000 (75%). Through the VDP, this could be reduced to R175,000 (35%) — a saving of R200,000.

Use our Understatement Penalty Calculator to see the difference the VDP makes for your situation.

Who Qualifies for the VDP?

To qualify for the VDP, your disclosure must meet the following requirements:

• Voluntary — the disclosure must not be prompted by a SARS audit or investigation. If SARS has already started looking into your affairs, the VDP is typically no longer available.
• Complete — you must disclose all relevant information. A partial or misleading disclosure will not qualify.
• Involve a default — there must be a tax default (an understatement of tax liability, failure to submit a return, or failure to pay tax).
• Relate to a tax period — the disclosure must relate to a specific tax period or periods.

Additional Benefits of the VDP

Beyond penalty reduction, the VDP provides:

• No criminal prosecution — SARS will not pursue criminal prosecution for the disclosed default.
• Reduced penalties — as shown in the table above.
• No 200% understatement penalty — the maximum understatement penalty under VDP is 75% (for intentional evasion), compared to 150% under jeopardy assessment.

How to Apply

VDP applications are submitted to the SARS Voluntary Disclosure Programme unit. The process involves:

• Completing the VDP application form (VDP01)
• Providing full details of the default, including tax type, tax periods, and amounts
• Submitting supporting documentation
• SARS reviews the application and issues a VDP agreement if accepted
• The taxpayer pays the outstanding tax plus the reduced penalty

Given the complexity and the stakes involved, it is strongly recommended that you work with a registered tax practitioner when applying for the VDP.