Interest remission and voluntary disclosure applications: Policy shifts, practical limits, and what taxpayers need to know

In Medtronic International Trading Sàrl v CSARS, the Constitutional Court held that a taxpayer could not seek interest remission after finalising a VDP agreement. The Court confirmed that interest relief was not available under the VDP framework itself and that, once the VDP process was concluded, the matter was regarded as final.  

In terms of the proposed change, taxpayers may apply separately for the remission of interest simultaneously with the submission of a VDP application, provided that the request is made under the relevant tax legislation and before the VDP agreement is concluded. This clarification is significant, as it addresses a longstanding area of uncertainty for taxpayers who regularise their tax affairs through the VDP but remain exposed to substantial interest liabilities on defaults voluntarily disclosed to SARS, particularly where the interest exposure far exceeds the underlying tax liability, often as a result of bona fide errors identified only in later years. 

Historically, taxpayers were effectively precluded from seeking interest relief once entering into a VDP agreement, largely due to the wording of the legislation and the finality attached to concluded VDP outcomes. The Budget Speech clarification, therefore, represents an important policy signal. While interest relief remains unavailable within the VDP framework, taxpayers are not automatically barred from applying for remission outside the VDP process. That said, this does not amount to a general or discretionary relief mechanism, and taxpayers should remain cautious not to overestimate the scope of the relief now contemplated. 

It is important to note that any application for interest remission must be made in terms of the relevant tax Act under which the interest was imposed, rather than the VDP provisions themselves. Although section 187 of the Tax Administration Act contains general interest provisions, certain aspects of this framework have not yet been fully implemented and, in practice, interest remission remains governed by the specific tax legislation applicable to the liability in question. 

As a general principle across the tax Acts, interest may be remitted where the late payment of tax was attributable to circumstances beyond the control of the taxpayer. In the context of valueadded tax specifically, the legislation further requires that the failure to pay must not have been due to an intention to evade payment or to postpone the tax liability. 

For this reason applications for interest remission are likely to be successful only in limited and exceptional cases, and SARS can be expected to apply the interest provisions conservatively. Relief is neither automatic nor routine, and the evidentiary burden rests squarely on the taxpayer. 

From a procedural perspective, the application for interest remission requires the submission of a fully substantiated Request for Remission, setting out both the factual background and the legal grounds relied upon. In practice, this is submitted via SARS eFiling using the Request for Remission (RFR) functionality. Taxpayers should also be mindful that there are no prescribed statutory timelines within which SARS is required to consider such requests. As a result, applications for interest remission may remain under consideration for several months before an outcome is communicated and will likely surpass the outcome of the VDP.   

Importantly, the clarification that interest remission may be sought simultaneously with a VDP application introduces a number of practical and procedural risks that taxpayers must carefully manage. The VDP regime operates on the premise of a clear separation or “Chinese wall” between SARS’ audit and enforcement functions and the voluntary disclosure process. Once a taxpayer is notified of an audit or investigation, access to the VDP is generally precluded. 

In this context, taxpayers should proceed with particular caution when pursuing an interest remission application alongside a VDP. Consideration should be given to ensuring that the VDP application is submitted first, and that the taxpayer clearly records its intention within the VDP submission to seek remission of interest under the relevant tax Act.  

Takeaway 

The clarification that interest remission may be sought outside of, but alongside, a VDP application is an important development, particularly in light of the restrictive position confirmed in Medtronic. While the Budget Speech signals a shift in policy, the proposed amendment is intended to apply from 1 March 2026, subject to legislative enactment and practical implementation by SARS. 

Until greater procedural certainty emerges, taxpayers should approach interest remission applications with caution, paying close attention to sequencing, disclosure strategy, and audit risk. Given the interaction between the VDP process, audit limitations, and interest remission requirements, taxpayers contemplating this route would be well advised to engage their tax advisors early to ensure that their position is protected and that access to the VDP is not inadvertently compromised. 

Authors 

Nicole Erlank & Ndumiso Madlala