I received a final letter of demand from SARS. I can’t pay them, what must I do?

Taxpayers are required to be fully compliant in all their tax matters by submitting and paying their taxes on time. SARS is within their legal rights to recover monies owed to them by taxpayers. One of the ways they do this is through Section 179 of the Tax Administration Act, which can allow them to instruct third parties such as your bank to deduct payment on their behalf as soon as your account has some money. 

How do I know how much I owe? 

By running your compliance status, you should be able to get a glance at how much you owe SARS. If you are not 100% certain how much you owe SARS, you will need to contact them on their call centre to enquire of your outstanding balances. If you stay not far away from a SARS branch, a visit to the SARS branch would not kill. When you visit, just ensure you have all your particulars with you to avoid being turned away. Lastly, if you were registered for e-filing, run a statement of account to see how much you owe SARS. Your next step is to make the outstanding payment to SARS. Contact SARS or your tax practitioner to help you load a payment that can then be released from your bank account.

What if I do not agree with what SARS says I owe them? 

After you submit your tax return, SARS may ask you for supporting documentation to verify your submission. If you believe that you made an error on your tax return, request a correct and resubmit your tax return with complete and accurate information. If you believe your tax return was correct, submit the requested documentation and every other document that supports the information on your return. 

After SARS has verified your information, they will issue an assessment and will show you how much you owe them or how much they owe you. If you do not agree with this assessment, you are within your rights to request reasons for this assessment or to object to this assessment within 30 days from the date that the assessment was issued. 

It is important to note that the lodgment of a notice of objection does not waive your obligation to pay what is due. SARS adopts a “pay now, argue later approach.” This means that your obligations towards them still stand until otherwise cleared by a corrected assessment. Therefore, it is important for the taxpayer to apply for a “suspension of payment” to prevent SARS from instituting a collection process. 

SARS has 10 business days to approve this. If they approve, this means that SARS may not institute a collection process for the debt in dispute pending the objection or appeal. If the suspension of payment is not allowed, the debt remains collectable by SARS. 

What if I cannot pay? 

Apart from the suspension of payment getting declined, it may also happen that the assessment is correct and the debt remains payable by the taxpayer. In this case, the taxpayer may apply for a payment arrangement. This is where a taxpayer goes to SARS with a proposed payment plan. SARS will apply its discretion in allowing this or not allowing it. 

Another mechanism available to the taxpayer is what is called a compromise. This is where the taxpayer can approach SARS and ask for part of the debt to be written off. Please do note that a compromise may affect a taxpayer’s credit history. Therefore, consult your financial advisor before asking for one. 

What if SARS proceeds to collect after suspension of payment or after I have reached a compromise or payment plan? 

If you applied for a suspension of payment, a repayment plan or compromise and SARS still proceed to recover the debt via a third party you have the following resources: 

  1. Lodge a formal complaint via the SARS complaints management process known as the Complaint Management Office (CMO.)
  2. If this fails, you can approach the office of the Tax Ombudsman. 
  3. If this fails, and maybe as a last resort, you can institute legal proceedings against SARS. 

Please consult your tax consultant for advice relating to this as each case needs to be assessed on its own merits. This is not formal tax advice or opinion. But I hope this has been helpful.

Should you need more detailed consultation, please consult us here.

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