When it comes to a tax debt owed to SARS, burying your head in the sand will not protect you while the imminent threat to your bank balance “blows over”. In fact, it is more likely you will resurface to find your savings having been attached by SARS, with no legal recourse of recovery.
Jashwin Baijoo
Associate Director and
Head of Strategic Engagement & Compliance
As many companies, local celebrities, and affluent individuals, have found, simply ignoring your tax debts and hoping SARS will forget, does not bode well.
This includes pursuing business rescue proceedings and hoping it may extinguish a portion of SARS’ claim to taxes rightfully due to the revenue collector, as seen in the case of JBSA Props (Pty) Ltd and Another v Commissioner for the South African Revenue Services and Others (5009/2023P) [2025] ZAKZPHC 3.
In the JBSA case, JBSA went into business rescue on 26 May 2020, which was terminated only on 13 December 2021. JBSA owed a VAT debt to SARS of circa R24 million, of which R9 million accrued prior to approval of the business rescue plan, and a further R15 million, between approval of the plan and termination of business rescue.
The central issue in this case was if JBSA had established prima facie that their obligation to pay their VAT debt, stemming from trading during business rescue, was compromised under the business plan. Whilst JBSA contested that SARS had tacitly acceded to the compromise of post-commencement tax debt, sections 200 to 204 of the Tax Administration Act, 28 of 2011, leaves no room for such.
These provisions clearly stipulate any compromise of tax debt must be reduced to writing, and signed by a senior SARS official, together with the taxpayer. The application was therefore dismissed.
When it comes to cutting your tax debt, there can be no cutting corners, and SARS must be legally and correctly approached, the first time around. Where a taxpayer does not have legal merits to pursue any form of dispute pertaining to the tax debt, but has difficulty in settling their full dues, a Compromise of Tax Debt application may be available to the taxpayer.
The Compromise is aimed at aiding taxpayers to reduce their tax liability by means of a Compromise Agreement, which is entered into with SARS. Where SARS is approached correctly, and the taxpayer’s financial circumstances warrant it, a tax debt can be reduced, and the balance paid off in terms of the Compromise.
To successfully compromise on the tax debt, the taxpayer needs to show current financial hardship, together with an estimation of their net worth. Where eligible, a taxpayer may, 1st and foremost, seek the write-off, on interest and penalties. The taxpayer then offers to settle (in part or in full) the capital amount owed to SARS, either by lumpsum or instalment payments. This proposal, when accepted by SARS, must be reduced to writing.
It is also important to note that a compromise can be applied to any form of tax debt and across all tax types, be it Personal or Corporate Income Tax, VAT and/or PAYE, and regardless of whether it is for an individual, trust or company. There is relief available to all taxpayers who qualify for the compromise of tax debt.
Taxpayers that do not satisfy the requirements for a compromise but cannot afford to settle a tax debt in a lump sum payment, still have the option to apply and enter into a payment arrangement with SARS, which is known as a deferral of payment.
Little known fact; SARS can instruct a bank to empty out bank accounts and make payment on a tax debt due, without the account holder’s authorisation. This is nothing out of the ordinary, and is seen even in the JBSA case where both Nedbank and Investec made direct payments to SARS.
This evidences how easy it is to be punished for taking a wrong turn when dealing with SARS.
Should taxpayers find themselves dealing with tax debt that is unaffordable, it is advisable that quick action be taken to prevent further interest and penalties being piled on to an already precarious situation. In these instances, it is recommended to obtain the protection of a Tax Attorney, well versed in tax debt negotiations, to safely aid in navigating the available tax debt relief solutions.
SARS’ Say Extends to Approving and Removing Public Officers for South African...