Business
New budget rule could give taxpayers more relief from SARS
For many South Africans, dealing with tax issues from the past can feel like trying to fix yesterday’s mistakes with tomorrow’s penalties. But a proposed amendment in the 2026 national budget could change how taxpayers approach the South African Revenue Service, giving them a stronger tool to resolve old tax problems.
If approved, the change will affect how the country’s Voluntary Disclosure Programme works. It could make the process more practical for taxpayers who want to come clean about historical tax defaults.
Why the voluntary disclosure programme matters
For years, the Voluntary Disclosure Programme has been one of the main ways for individuals and companies to correct past tax errors with SARS.
The idea behind the programme is fairly simple. Taxpayers who voluntarily disclose past mistakes before SARS detects them can avoid criminal prosecution and may receive reduced understatement penalties.
This system has helped reinforce trust in South Africa’s tax framework. It encourages honesty while still allowing SARS to collect money that may otherwise remain undisclosed.
However, tax experts have long pointed out a frustrating limitation in the process.
The problem that has frustrated taxpayers
Under the current legal framework, taxpayers who applied for voluntary disclosure relief could not also request remission of interest on the same tax default.
In practical terms, this meant that even if a taxpayer admitted the mistake and qualified for relief from penalties or prosecution, they could still face large interest charges.
These interest costs can become substantial, especially for older tax issues where years of interest may have accumulated. In some cases, the interest owed can even exceed the original tax amount.
This restriction was confirmed by South Africa’s Constitutional Court in the well-known Medtronic case. The court ruled that voluntary disclosure and interest remission could not be combined unless legislation specifically allowed it.
Legally, the decision made sense. Courts cannot create powers that Parliament has not written into law. But from a policy perspective, many experts believed the rule weakened the incentive for taxpayers to come forward.
A proposed fix in the 2026 budget
The 2026 Budget proposes a targeted legislative amendment to address this gap.
If implemented, taxpayers who apply under the voluntary disclosure programme would also be able to request remission of interest under the relevant tax legislation at the same time.
Importantly, this does not mean interest will automatically be written off. Interest remains a mechanism that compensates the state for the delayed payment of tax.
What the amendment does instead is allow decision makers to consider both issues together. SARS would be able to review the full circumstances of a taxpayer’s case and determine whether the legal requirements for interest relief are met.
The proposed change is expected to take effect from 1 March 2026.
Why tax experts say the change matters
According to tax specialists André Daniels and Richan Schwellnus from Tax Consulting SA, the amendment could improve both fairness and efficiency in the tax system.
First, it provides clarity. Taxpayers considering voluntary disclosure will know they can present their full position to SARS in a single process rather than navigating separate procedures.
Second, it strengthens the purpose of the voluntary disclosure programme itself. The system is designed to encourage early and honest disclosure. Removing procedural barriers helps reinforce that goal.
Third, it recognises that interest remission is not a special favour from SARS. It is a legal discretion already built into tax legislation, which means there is little policy reason to exclude voluntary disclosure applicants from applying for it.
Why taxpayers may want to act sooner rather than later
The proposed amendment also sends a broader message about how South Africa’s tax system is evolving.
Authorities continue to strengthen enforcement tools and improve detection systems. Waiting for a tax problem to remain hidden is becoming increasingly risky.
Interest continues to grow over time, and once SARS launches an audit or investigation, taxpayers can no longer access voluntary disclosure relief.
That reality means the advantage often lies with those who act early.
Tax specialists suggest that taxpayers with historical tax issues should review their financial records carefully. Identifying past exposures, calculating potential liabilities, and considering whether voluntary disclosure may apply could help prevent bigger problems down the line.
For many businesses and individuals, the voluntary disclosure process is not just about penalties or interest. It is also about restoring compliance and protecting credibility in an environment where regulatory scrutiny is increasing.
And if the proposed budget amendment becomes law, taxpayers who step forward voluntarily may soon have a more balanced path to putting old tax problems behind them.
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Source: Daily Investor
Featured Image: News24
