What the VDP has never offered, however, is relief from interest, which accrues automatically on outstanding tax amounts and can, for taxpayers with large historic defaults, rival or exceed the underlying tax liability.

The Medtronic decision

In Commissioner for the South African Revenue Service v Medtronic International Trading S.A.R.L. [2024] ZACC 26, the Constitutional Court considered whether a taxpayer could seek interest remission under section 39(7) of the VAT Act after concluding a voluntary disclosure agreement.

The court effectively held that: (i) by signing an agreement (which included interest as a statutory requirement) the taxpayer accepted its terms, and allowing subsequent remission would render the interest provision worthless; (ii) the legislature deliberately excluded interest relief from the VDP framework; and (iii) the principle of pacta sunt servanda required that the binding agreement be honoured.

The practical consequence emanating from the judgment was that once an agreement is concluded, a taxpayer cannot separately seek remission of the interest incorporated therein.

The 2026 Budget proposal

Taking express note of Medtronic, it is proposed that provision be made to specifically permit VDP applicants to simultaneously apply for the separate remission of interest under the relevant tax act (e.g. section 39(7) of the VAT Act or section 89quat of the ITA) in respect of the defaults disclosed under the VDP.

Critically, the interest remission application must be made simultaneously with – not after – the voluntary disclosure application, consistent with Medtronic's reasoning against post-agreement remission requests.

The amendment is proposed to take effect from 1 March 2026.

Practical implications

The proposal makes the VDP somewhat more attractive for taxpayers with historic defaults, in that there is at least a possibility for interest to be reduced. However, it is important to note that interest remission will remain governed by the relevant tax act. In other words, it will not form part of the relief guaranteed under the VDP.