SARS VDP Guide Updates: What Every Business Needs to Know

Why the VDP Update Matters to Your Business

For many South African businesses, the Voluntary Disclosure Programme (VDP) has long served as a vital mechanism for regularizing tax affairs. It offers a “clean slate” for companies that discover historical errors, allowing them to disclose defaults in exchange for relief from understatement penalties and criminal prosecution. However, the South African Revenue Service (SARS) recently updated its VDP Guide (Issue 2), introducing significant shifts in how the programme is administered.

These updates are not merely administrative; they represent a tightening of the perimeter around who can apply and what happens once an agreement is reached. For directors and business owners, understanding these changes is critical to avoiding costly mistakes that could lead to rejected applications or irreversible financial commitments.

Key Business Implications

The updated guide introduces three primary shifts that every SME and corporate entity must navigate:

• Separation of Customs and Excise: A new statutory requirement (Section 227(g)) now explicitly excludes customs and excise underpayments from the general VDP process. Businesses involved in importing, exporting, or manufacturing excisable goods (such as alcohol, tobacco, or fuel) can no longer bundle these defaults with their income tax or local VAT disclosures. A dedicated Customs VDP is on the horizon, but until it is fully operational, these two streams must be handled separately.
• The Finality of Agreements: Following the Constitutional Court’s ruling in the Medtronic case, the updated guide reinforces that once a VDP agreement is signed, it is legally binding and final. Businesses can no longer seek “back-door” relief, such as applying for interest remission under other sections of the Tax Act after the VDP contract is concluded. The figures you agree to are the figures you must pay.
• A Stricter “Voluntary” Test: To qualify for relief, a disclosure must be truly voluntary. SARS has clarified that even informal “probing” or a notification of a verification—not just a formal audit—can be enough to disqualify a business from the programme. If SARS has already begun looking into your affairs, the window for a VDP application may already be closed.
• Anti-Avoidance Measures: SARS is cracking down on businesses that submit “nil” or minimal-value returns simply to keep their tax status active with the intent of using a VDP later. Such tactical filings are now flagged as grounds for rejecting a VDP application.

Compliance and Financial Risks

The risks of mismanaging a VDP application have increased substantially. If a business submits a disclosure that is deemed “involuntary” because of prior SARS contact, the application will be rejected, leaving the company exposed to the full weight of understatement penalties, which can reach up to 200% in cases of intentional tax evasion.

Furthermore, the “once-and-for-all” nature of the signed agreement means that any mathematical errors or misunderstood tax positions cannot be corrected later to reduce interest. If your professional advisor miscalculates the liability before you sign, your business is legally obligated to honor that amount. This places a much higher premium on the accuracy of the initial submission and the supporting documentation provided to the VDP Unit.

What Business Owners Should Do Next

To protect your organization and ensure compliance under the new rules, consider the following steps:

1. Conduct an Internal Tax Health Check: Proactively review your records for the past five years.

   Source: What Changed in the SARS VDP Guide