THE SPOILS OF WAR: TAX DEBT COMPROMISE WITH SARS

The War Room

In these uncertain times, many taxpayers do not have the financial means to settle large debts owed to the South African Revenue Service (“SARS”), between the business restrictions imposed by the spread of COVID-19 and the resultant decline of the South African economy, a large number of small to medium enterprises (“SMEs”), as well as individual taxpayers, face troubling times ahead.

A major contributing factor to South Africans facing this plight, is that many taxpayers, pre-pandemic, lived month to month, enjoying every cent of their hard-earned money, with strategic tax-planning unfortunately being the furthest thought at the back of their minds.

Taxpayers who find themselves in this situation, feeling like they are staring down the barrel of a gun, do have solutions available to them, but none so favourable as an application for a compromise of tax debt (“the compromise”), which cease-fire SARS have, in recent times, become more amicable toward, showing great compassion for the financially constrained taxpayer.

A Knight at the Negotiation Table

To successfully compromise on the tax debt, the taxpayer needs to show current financial hardship, together with an estimation of their net worth. It must, however, be borne in mind that prior lavish spending could be a kink in the armour SARS needs to decline the initial proposal and request quite a drastic increase in the settlement amount.

There is no two ways about it, and it has in recent months come to the foreground that SARS is not messing around when it comes to the collection of outstanding tax debts. In light of the recent SARS-Treasury team-up, National Treasury has voiced their support of SARS implementing more aggressive collection measures to aid in the recuperation of South Africa’s economy.

It always has and will continue to, reflect very unfavourably for a taxpayer when they apply for a compromise, only to have their prior lavish lifestyle highlighted by SARS, followed by a rejection of what may often be, all the taxpayer can afford at the time of such application.

The unfortunate truth of the matter is that a lack of tax planning may very well land taxpayers in some hot water.

Slaying the Dragon

In order to protect yourself from SARS, it remains the best strategy that you always ensure compliance. Where you find yourself on the wrong side of SARS, there is a first-mover advantage in seeking the appropriate tax advisory, ensuring the necessary steps are taken to protect both yourself and your pot of gold from SARS’ fiery wrath. However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed.

As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures but also being specialists in their own right, the taxpayer will be correctly advised on the most appropriate solution to ensure their tax compliance.