Can’t Afford to Pay SARS? Here Are Your Options

You open a letter from SARS and see an amount you cannot afford to pay. Perhaps your business has experienced a difficult year, a major customer has not paid you, or submitting outstanding returns has resulted in an unexpected tax bill.

Your immediate concern is understandable: How am I supposed to pay this when I am already struggling to meet my monthly expenses?

There are formal processes through which taxpayers can seek assistance with outstanding tax debt. The right approach starts with understanding the amount owed, your financial position, and what you can realistically offer.

First, understand exactly what you owe

Before committing to a repayment proposal, establish how the balance arose.

A useful starting point is to review your SARS statements of account alongside the relevant assessments, returns and proof of payments. Ask:

• Which tax types and periods make up the debt?

• Have your previous payments been correctly allocated?

• Are any returns still outstanding?

• Do you understand and agree with the assessments?

• How much of the balance relates to tax, penalties, and interest?

This review helps identify what needs attention. For example, a payment that does not appear against the intended liability requires investigation before you calculate what remains payable.

Understanding the account also makes your next conversation more productive. You can move from “SARS says I owe money” to a clear explanation of the debt and the problem you need to resolve.

Option 1: Request time to pay

A payment arrangement allows an approved tax debt to be paid over time. Interest generally continues to accrue, and failing to comply with the agreed conditions can lead to termination of the arrangement.

When considering this route, start with a realistic budget. What remains available after essential expenses and your ongoing tax obligations? Are you relying on income that is reasonably predictable, or on a customer who has repeatedly promised payment?

For illustration, a business may be unable to settle an outstanding balance immediately but have sufficient monthly income to support a repayment proposal. The practical task is to demonstrate that the proposed instalments are sustainable.

SARS provides a payment-arrangement request process through eFiling, including the ability to propose different payment terms. Its validation checks include outstanding returns and previous defaults, so resolving these issues may be necessary before the application can progress.

Avoid proposing an amount simply because you think it will secure approval. An instalment that leaves you unable to pay next month’s expenses is unlikely to provide a lasting solution.

Option 2: Consider a tax debt compromise

Where your financial difficulties are more serious, a debt compromise may warrant consideration.

Under section 200 of the Tax Administration Act, SARS may agree to compromise a portion of a tax debt where the statutory requirements are met. The purpose must be to secure the highest net recovery, consistently with sound tax administration and administrative efficiency.

Financial hardship alone does not guarantee approval. A proposal needs to explain why the offered amount is justified in light of your financial position and SARS’s recovery prospects. SARS requires supporting documentation, including a motivated offer and an explanation of how it will be funded.

Preparing that proposal requires more than choosing a percentage of the debt. The figures need to tell a coherent story: what you own, what you owe, what you earn and what is available to fund an offer.

A useful question to ask is: If SARS examines the supporting records, will they support the

explanation in the application?

What if the assessment is wrong?

An incorrect assessment calls for a review of the appropriate correction or dispute process. Lodging a dispute does not automatically suspend your obligation to pay. A separate suspension-of-payment request may be appropriate.

Raise any concerns about the assessment at the outset. This allows the underlying liability and the immediate payment position to be considered together.

Why waiting can make the situation harder

It is tempting to postpone dealing with SARS until your finances improve. However, unresolved debt can progress to collection action. Subject to the applicable legal requirements, SARS may appoint a third party, such as a bank or employer, to pay money towards the debt, or pursue steps involving your assets.

If you have received a final demand, make that clear when seeking assistance and provide the complete notice. Its wording and deadlines need attention.

Early engagement gives you more time to organise records, investigate discrepancies and prepare a considered response.

How SVH Tax Consulting can help

When you are under financial pressure, working out where to start can be the hardest part.

At SVH Tax Consulting, we assist individuals and businesses with reviewing their tax position and identifying an appropriate way forward. Depending on your circumstances, this may involve bringing outstanding returns up to date, investigating account discrepancies, preparing a payment-arrangement request or assessing the suitability of a debt compromise.

Our role is to connect the facts, supporting records and applicable requirements in a clear, properly motivated submission. Approval remains subject to SARS’s assessment and the relevant legal requirements.

Take the first step towards addressing your SARS debt

You do not need to have every answer before asking for assistance.

Contact SVH Tax Consulting at info@svhtax.com to arrange a consultation. Let us know whether the debt relates to you or your business, the approximate amount outstanding and whether you have received a demand from SARS. We will explain what information is needed to assess your position and advise on the next steps.

This article provides general information. The appropriate course of action depends on your circumstances and the applicable legal requirements.