If you are a South African taxpayer with offshore interests, the landscape in which you operate is undergoing a fundamental shift. Increased international cooperation and enhanced domestic oversight means that the days of "offshore privacy" are largely behind us, as the South African Revenue Service (“SARS”) has strengthened its ability to detect undeclared foreign bank accounts, investments (including digital assets like cryptocurrency), and offshore asset-holding structures like companies and trusts. If you need to regularise your affairs, we propose that you consider SARS’ Voluntary Disclosure Program (“VDP”).

Starting on 1 March 2026, SARS began receiving bulk financial data from over 120 jurisdictions through expanded Automatic Exchange of Information standards. This framework allows for the systematic collection of data regarding foreign assets and structures linked directly to you as a South African resident. To process this influx of information, SARS appears to be looking to recruit specialists like forensic investigators, wealth management specialists and data scientists. Simply put, SARS now has the data, and they are ensuring that they have the technical skills to utilise it to its full potential.

Should SARS become aware of your undeclared offshore assets and/or income, you could face penalties of up to 200%, significant accrued interest, and even criminal liability. Proactively initiating a VDP is the most effective strategy to manage the risks of non-compliance. It is important to remember that if SARS notifies you of the commencement of an audit or a criminal investigation regarding a non-declaration, your ability to take full advantage of the VDP process is hampered, and your application will either be denied in its totality or the penalty remission will be capped.

Successfully concluding a VDP agreement provides you with significant legal protection. Most notably, SARS is prohibited from pursuing criminal prosecution for tax offences arising from the disclosed default. Additionally, you are granted relief from understatement penalties to a specified extent as outlined in the statutory penalty tables. The program also offers 100% relief from administrative non-compliance penalties, although it is important to note that this does not apply to penalties imposed for the late submission of a tax return itself. While the program does not allow for the remission of interest, the Minister, in his budget speech recently, proposed that interest be addressed with a concurrent request for remission of interest from 1 March 2026.

The statutory framework sets out specific requirements and limitations for your disclosure to be considered valid, such as:

1.         The application must be voluntary, meaning it must be made before you are notified of an audit or investigation into that specific default;

2.         The submission must be full and complete in all material respects, covering defaults such as submitting inaccurate information or failing to submit information entirely;

3.         The default must not have occurred within five years of a similar previous disclosure; and

4.         The disclosure must not result in a refund being due to you by SARS.

If you are hesitant about coming forward, you have the option to seek a "no-name" non-binding private opinion from a senior SARS official. This allows you to determine your eligibility for relief without initially revealing your identity. If the application is eventually approved, it culminates in a written VDP agreement that details the material facts of the default, the amount payable and the specific payment arrangements.

With the rapid modernisation of tax administration through artificial intelligence, advanced data science and real-time automated compliance, the window for undetected non-compliance is closing.

We encourage you to contact our Offices should you have any unregularised offshore assets or structures, to discuss how a VDP can assist you and provide you with lasting peace of mind.