The Finance Bill, 2020 (the Bill) was published on 5th May 2020 and it follows various tax measures implemented under the Tax Laws Amendment Act, 2020 aimed at alleviating the adverse impact of the COVID-19 pandemic. Section 15 of The Bill proposes the amendment of the Tax Procedures Act by the insertion of a new section 37D, establishing a programme to be known as the Voluntary Tax Disclosure Programme (the Programme).

The Programme is proposed to run for a three-year period from 1st January 2021 and aims to encourage taxpayers to self-audit and self-declare their tax liabilities to the Commissioner General (the Commissioner). Self-declaration of tax liabilities under the Programme affords a taxpayer a flexible tax payment plan over a period of one year and remission of attendant penalties and interest.

A taxpayer can only apply the Programme for tax liabilities arising from activities carried over the five-year period prior to 1 July 2020. This may be in respect to offshore related activities or domestic related activities.

This relief, ensures that a person upon whom it is granted, shall not be prosecuted with respect to the tax liability disclosed. They shall also be granted a remission of the interest and penalty due on the tax liability dependent on when the disclosure was made. The amended section states that:

  • Where the disclosure is made and the tax liability paid in the first year of the Programme there shall be full remission of the interest and penalty;
  • Where the disclosure is made and tax liability paid in the second year of the Programme there shall be a fifty per cent remission of the interest and penalty;
  • Where the disclosure is made and the tax liability paid in the final year of the Programme there shall be a twenty-five per cent remission of the interest and penalty.

An application for the disclosure of tax is submitted to the Commissioner and once relief is granted, the Commissioner and the disclosing party are to enter into an agreement setting out the terms of payment of the tax liability. The period within which payment shall be made shall not exceed one year from the date of the agreement. Where the terms of the agreement are not met, the person shall be liable to pay the full interest that had been remitted under the agreement. Any disclosure of a tax liability under this section shall be confidential.

The Bill further provides that where the Commissioner establishes that the person failed to disclose a material fact in respect of the relief granted, the Commissioner has the prerogative to withdraw any relief granted, asses and collect any balance of the tax liability or commence prosecution.

The limitation of the tax disclosure Programme is to a person under audit, investigation or is a party to ongoing litigation in respect of the tax liability and a party notified of a pending audit or investigation by the Commissioner.

If the Bill is passed into law and is fully implemented, the Programme will provide an opportunity to facilitate tax compliance in a timely and cost-efficient manner without involving litigation. It may also lead to an increase in revenue collection by the tax man as it provides a waiver on penalties thus encouraging the declaration of taxes previously not remitted.

If you have any questions relating to the Voluntary Tax Disclosure Programme or other tax matters, do not hesitate to contact taxconsultant@mwc.legal. Please note that this e-alert is meant for general information only and should not be relied upon without seeking specific subject matter legal advice.

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