
Confronting a tax obligation owed to SARS is crucial; turning a blind eye will not protect your financial wellbeing. Ignoring the issue could result in the painful surprise of asset seizure by SARS, which leaves you with no legal remedies for recovery.
As numerous businesses, local public figures, and affluent individuals have found, simply neglecting tax debts in the vain hope that SARS will also overlook them is an ineffective approach.
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This includes efforts to initiate business rescue proceedings hoping to mitigate a portion of SARS’ legitimate tax claims, as demonstrated 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.
High court ruling reinforces SARS’s firm approach to non-compliance
In the JBSA case, the company entered business rescue on 26 May 2020, concluding on 13 December 2021. JBSA had an outstanding VAT debt of around R24 million, including R9 million accrued prior to the business rescue plan’s approval and another R15 million accumulated during the post-approval period until the termination of the rescue.
The primary consideration in this scenario was whether JBSA had sufficiently established prima facie that its VAT obligations incurred during business rescue were compromised under the business rescue plan. JBSA asserted that SARS had implicitly consented to the compromise concerning post-commencement tax debts. Nonetheless, sections 200 to 204 of the Tax Administration Act, 28 of 2011, counter this assertion.
These sections clearly state that any compromise of tax debt must be recorded in writing and signed by a senior official from SARS and the taxpayer. As a result, the application was dismissed.
Available options for legally addressing tax debt
When seeking to reduce tax debt, it is vital to follow appropriate legal channels; SARS must be approached in a proper and lawful manner from the beginning. If a taxpayer lacks valid grounds to contest the tax debt but struggles to pay the full amount, they may consider applying for a tax debt compromise.
The aim of the compromise is to aid taxpayers in decreasing their tax liabilities through an agreement with SARS. If approached correctly, and considering the taxpayer’s financial situation, the tax debt may be diminished, enabling repayment of the remaining balance based on the terms of the compromise.
To successfully negotiate a tax debt compromise, the taxpayer needs to show current financial hardship and provide an estimation of their net worth. Eligible taxpayers can initially request the cancellation of interest and penalties. Following this, they can propose to settle either partially or completely the principal amount owed to SARS, whether as a lump sum or through instalments. Documenting this proposal is essential once approved by SARS.
It is vital to understand that a compromise can apply to all forms of tax debt and is valid across various tax categories, including personal and corporate income tax, VAT, and/or PAYE, affecting individuals, trusts, or corporations. Relief is available for all taxpayers who qualify for the tax debt compromise.
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Taxpayers who do not qualify for a compromise yet cannot pay their tax debt in a full lump sum still have the option to request a payment arrangement with SARS, commonly known as a payment deferral.
Contact SARS before they seize your bank accounts
It is less commonly known that SARS has the authority to direct a bank to liquidate accounts in order to satisfy a tax debt without the account holder’s consent. This practice was highlighted in the JBSA case, wherein both Nedbank and Investec made direct payments to SARS.
This serves as a reminder of how easily one can encounter severe consequences when tax matters with SARS are mismanaged.
If taxpayers find themselves burdened with overwhelming tax debt, timely intervention is advisable to prevent accumulating further interest and penalties that could worsen the situation. In such instances, consulting a Tax Attorney well-versed in tax debt negotiations can be invaluable in exploring available relief options.
Jashwin Baijoo is anassociate director and head of strategic engagement & compliance at Tax Consulting SA.
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