SARS's Collection Powers
Before discussing solutions, it is important to understand what SARS can do if you do not engage with your debt:
- Third-party appointment: SARS can instruct your bank to pay your debt directly from your account, without a court order
- Garnishee order: SARS can attach your salary
- Asset seizure: SARS can seize and sell assets to recover debt
- Judgment: SARS can obtain a civil judgment, which affects your credit record
- Travel ban: For large debts, SARS can apply to have your passport flagged
These powers make SARS one of the most powerful creditors in South Africa. The critical message is: do not ignore SARS debt. Engage proactively.
Option 1: Payment Arrangement (Section 167)
Under Section 167 of the Tax Administration Act, a taxpayer who cannot pay their full tax debt immediately may request a deferred payment arrangement. This allows the debt to be paid in instalments over an agreed period.
How to apply:- Log in to eFiling and navigate to "Debt Management"
- Select "Request for Payment Arrangement"
- Complete the financial information form (income, expenses, assets, liabilities)
- Propose a monthly payment amount and duration
- SARS will assess the proposal and either accept, counter-propose, or reject
- Your ability to pay (based on disposable income)
- The nature of the debt (PAYE and VAT are treated more strictly than income tax)
- Your compliance history
- Whether the arrangement is in SARS's interest
Option 2: Compromise of Tax Debt (Section 204)
A compromise is a more significant concession — SARS agrees to accept less than the full amount owed in full settlement of the debt. This is available in limited circumstances:
- The taxpayer is insolvent or faces insolvency
- The taxpayer is a company in business rescue
- Collection of the full debt would be uneconomical (the cost of collection exceeds the likely recovery)
A compromise application requires a detailed financial disclosure and is assessed by a senior SARS official. It is not commonly granted and should only be pursued with professional assistance.
Option 3: Voluntary Disclosure Programme (VDP)
If your debt arises from undisclosed income or errors in prior returns (rather than assessed tax you simply cannot pay), the Voluntary Disclosure Programme may be the appropriate route:
- Reduced penalties (up to 100% reduction in some cases)
- No criminal prosecution for the disclosed default
- Interest is not waived but penalties are substantially reduced
VDP applications must be made before SARS initiates an audit or investigation. Once SARS has identified the non-compliance, VDP relief is no longer available.
Option 4: Dispute the Assessment
If you believe the SARS assessment is incorrect, you have the right to object within 30 business days of the assessment. An incorrect assessment should be disputed before any payment arrangement is considered.
The dispute process:
- Notice of Objection (NOO) — filed on eFiling within 30 business days
- SARS decision — SARS has 60 business days to decide
- Notice of Appeal (NOA) — if the objection is disallowed, appeal to the Tax Board (for amounts below R1 million) or Tax Court (for larger amounts)
The Role of a Tax Practitioner
Negotiating with SARS is not something most taxpayers should do alone. The process involves:
- Preparing accurate financial disclosures
- Knowing which concessions SARS is likely to grant
- Avoiding statements that could be used against you
- Managing the timeline to prevent enforcement action
At Fulcrum | BI Prime, we have extensive experience negotiating payment arrangements and compromises with SARS. We act as your representative throughout the process, ensuring your rights are protected while working toward a sustainable resolution.
Sources: Tax Administration Act s167 | SARS Debt Management