The Voluntary Disclosure Programme (“VDP”) is governed in terms of the Tax Administration Act. It was introduced to encourage qualifying taxpayers to regularise tax defaults by offering significant relief from certain punitive measures.
Established VDP Relief:
Under the existing VDP framework, taxpayers can seek relief from:
- Criminal prosecution;
- Understatement penalties
- Administrative non-compliance penalties
- Late payment penalties
However, the Tax Administration Act does not provide for the automatic relief from interest under the current VDP relief provisions. Interest is generally not considered punitive in nature, instead intended to account for the time value of money lost to the fiscus.
Despite the significant relief afforded under the VDP, interest on underlying tax debt may remain substantial, especially in cases involving prolonged periods of non-compliance. Onerous interest liabilities may deter taxpayers from voluntarily regularising their tax affairs, undermining the effectiveness of the VDP.
In the recent Constitutional Court case between SARS and Medtronic International Trading S.A.R.L., the taxpayer sought interest remission after concluding a Voluntary Disclosure Agreement (VDA) with SARS. The Constitutional Court considered whether interest could be remitted after the conclusion of a VDA.
In a unanimous judgement, the Court concluded that such remission is not permissible. It reasoned that interest forms an integral component of a VDA, and that permitting its remission after the conclusion of the agreement would effectively undermine the agreement itself.
Proposed Policy Changes
Whilst the judgement upheld the integrity of the Voluntary Disclosure Programme, it also highlighted the inherent policy tension. In the 2026 Budget, National Treasury proposed amendments intended to allow taxpayers applying for VDP relief to simultaneously apply for the remission of interest under the relevant provisions of the applicable tax legislation to which the default relates. The proposed changes are intended to be effective from 01 March 2026.
The proposed changes is a welcome development. By addressing one of the most significant financial barriers to voluntary disclosure, it has the potential to enhance the effectiveness of the VDP. It introduces a parallel process through which interest relief may be considered at the time of disclosure.
The proposed amendments remain subject to the legislative process and may be subject to further refinement before implementation.
Should you require any guidance or assistance with preparing a VDP application, please contact your nearest PKF office.
