Many taxpayers have something in their tax history they would rather not think about: rental income that was never declared, an offshore account inherited from a parent, crypto gains, cash sales in a family business, or an aggressive deduction that may not survive scrutiny.
Ignoring the problem is becoming harder. SARS now receives financial account information from other countries under the Common Reporting Standard, and on 1 March 2026 South Africa implemented the Crypto-Asset Reporting Framework (CARF), under which crypto asset service providers report customer transaction information to SARS. Information that once sat outside SARS’s view is increasingly visible.
The Voluntary Disclosure Programme (VDP) allows taxpayers to come forward before SARS finds them, and to regularise their affairs with significant relief from penalties and protection from criminal prosecution. Draft legislation published in 2026 also proposes allowing VDP applicants to apply for relief from interest. This article explains how the programme works and when it is worth considering.
The legal framework
The VDP is set out in sections 225 to 233 of the Tax Administration Act 28 of 2011 (TAA). It applies to most taxes administered by SARS, including income tax, VAT, employees’ tax and capital gains tax. Exchange control contraventions are dealt with separately through the Financial Surveillance Department of the South African Reserve Bank, although the two processes are often run together where offshore assets are involved.
Who qualifies?
An application must meet several requirements:
- It must be voluntary. A person who has been notified of an audit or criminal investigation into the matter generally cannot apply, unless a senior SARS official allows it in limited circumstances.
- It must be full and complete in all material respects. Holding back information can lead to the agreement being withdrawn.
- It must involve a “default”, meaning incorrect or incomplete information was submitted, or information was not submitted, resulting in an understatement or other prejudice to SARS.
- The default would otherwise attract an understatement penalty.
- It must not result in a refund to the applicant.
- It must not repeat a similar default disclosed in the previous five years.
The VDP is not a route to deal with returns that simply have not been filed. Outstanding returns should be submitted through normal processes. Information SARS already holds about the default may also mean the disclosure is not “voluntary”.
What relief is available?
If SARS approves the application and concludes a VDP agreement with the taxpayer:
- SARS will not pursue criminal prosecution for the disclosed default;
- understatement penalties are reduced, in many cases to nil, depending on the taxpayer’s behaviour and whether the disclosure was made before or after notice of an audit; and
- administrative non-compliance penalties are generally waived, except penalties for the late submission of returns.
The tax itself remains payable. Under the current law, interest on the unpaid tax is also payable in full, which for older defaults can be a substantial amount.
The 2026 proposal on interest
The draft Tax Administration Laws Amendment Bill, 2026, published for comment in July 2026, proposes that a VDP applicant may also apply for remission of interest on the default, that the VDP agreement must be in writing, and that SARS may withdraw relief in specified circumstances. The proposed changes are drafted to apply to applications received on or after 1 March 2026. These are proposals only and may change before they are enacted, but they could make the programme more attractive for taxpayers with long-standing defaults.
How the process works
- Gather the facts. Identify the periods, taxes and amounts involved. Where records are incomplete, reasonable estimates may be accepted if properly supported.
- Consider an anonymous approach. SARS allows applicants to engage the VDP unit anonymously at first, and to request a non-binding private opinion on whether the application is likely to qualify.
- Prepare and submit the application on the prescribed form (VDP01), with supporting documents, through SARS’s VDP channel.
- Respond to SARS’s questions and provide any additional information requested.
- Sign the VDP agreement, which records the default, the relief granted and the amounts payable.
- Pay or arrange payment of the tax and interest, and correct your future returns.
When is the VDP worth considering?
The VDP is worth considering if you have undeclared income or assets, particularly offshore assets or crypto holdings, and SARS has not yet contacted you about them. Timing matters. Once SARS has notified you of an audit, you may lose access to the programme, and penalties can rise steeply. On the other hand, an application that is incomplete or poorly prepared can leave you worse off, because the disclosure is made but the relief is withdrawn.
A checklist before you apply
- Confirm that SARS has not issued an audit or investigation notice on the matter.
- List every tax type and period affected, not only the most obvious one.
- Consider whether exchange control issues also arise.
- Estimate the tax and interest, and plan how you will pay.
- Decide whether to make an anonymous approach first.
- Make sure the disclosure is complete, accurate and supported by documents.
- Keep the VDP agreement and correct your tax position going forward.
How O’Reilly Law can help
We advise individuals, trusts and companies on voluntary disclosures to SARS, including anonymous approaches, preparing VDP applications and negotiating the VDP agreement. We work with your tax practitioner on the calculations and can coordinate related exchange control applications. Where SARS has already started an audit, we advise on the dispute resolution options under the TAA.
Speak to us in confidence about regularising your tax affairs.
Related reading: SARS and directors’ personal liability for company tax debts · Crypto asset service provider licences in South Africa
This article is general information and not legal or tax advice. Correct as at October 2026.