What to Do if You Owe Money to SARS

If, after being assessed by SARS on your annual tax return, you owe tax for the tax year, there are ways you may be able to alleviate the impact on your bank balance.

Your assessment showing that you owe money to SARS will provide a due date for the full amount to be paid, after which interest will accrue. If you fail to pay, SARS’s debt management division will send you a final letter of demand, setting out the amount owed and providing 10 business days for the debt to be settled.

If you continue to avoid payment, SARS will hand your case over to a debt collection agency. According to the SARS website, the agency or SARS may institute the following measures:

• Collect the debt from a third party that holds money on your behalf, such as your employer or bank.

• Issue a judgment and have your name blacklisted.

• Attach and sell your assets.

• Obtain a preservation order in respect of your assets.

• Order any offshore assets you may have to be repatriated to South Africa and in the interim your right to trade or travel may be restrained.

• Liquidate or sequestrate your estate.

Payment arrangements

You should contact SARS without delay if you cannot afford to pay your tax debt. You are entitled to request and may come to an agreement with SARS to defer your debt for later payment or to pay it off in installments. However, be aware that SARS has the option to decline such a request, that interest will accrue on any unpaid debt, and that if you don’t adhere to the conditions, the arrangement will be terminated and collection proceedings will resume.

On its website, SARS says the payment arrangement must cover the entire debt, and the request will only be considered once any non-compliance has been remedied and all your returns and/or recons have been submitted. If you have defaulted on a previous payment arrangement, “reasonable and valid reasons for the default” must be provided before another deferment request will be considered.

On paying off your debt in installments, Jashwin Baijoo, associate director, and Junaid Bhayla, an attorney at Tax Consulting SA, say: “This is an attractive option to many taxpayers, as it lessens the burden and reduces a large number expected to be settled immediately to one that is manageable and paid in monthly installments that are convenient to the taxpayer and SARS.”

In exceptional circumstances you may request a “compromise” on your outstanding debt, which means SARS reduces the amount owing. However, you will need to be open with SARS about your financial situation. 

Maijoo and Bhayla say that, to successfully compromise on the tax debt, you need to show current financial hardship, together with an estimation of your net worth. “It must, however, be borne in mind that prior lavish spending could be the chink in your armour that SARS needs to decline the proposal and request quite a drastic increase in the settlement amount,” they say.

Dispute over the debt amount

If you do not agree with the amount of debt you owe, you may lodge a dispute. This may be done following the dispute procedure on the SARS website.

Be aware that you remain obliged to pay the debt while your dispute is being handled, although you may request a suspension of payment for the period in question. Again, interest will accrue on unpaid debt.