3 lifelines to help you avoid trouble with SARS
The South African Revenue Service (SARS) is getting stricter on compliance and targeting taxpayers in multiple directions, but it also offers options to soften the blow for those caught on its web.
There are three main routes to taking on SARS or getting ahead of a messy battle over taxes.
1. Voluntary disclosure
The first lifeline SARS offers is the Voluntary Disclosure Programme (VDP), which is is now available permanently to a qualifying individual, company or trust that seeks to voluntarily disclose and regularise their tax affairs.
SARS has been encouraging all taxpayers who may be in default on their tax affairs, to approach SARS via the VDP, bu coming forward willingly (before being caught out by the taxman) to get help and advice from the service to help settle their problems.
A defaulting taxpayer will be granted relief under the programme if the application meets the following requirements:
- The disclosure must be voluntary;
- The disclosure is full and complete in all material respects;
- The disclosure involves a default which has not occurred within five years of the disclosure of a similar default;
- The disclosure involves a behaviour referred to in the understatement penalty table in Section 223 of the Tax Administration Act;
- The disclosure would not result in a refund due by SARS; and
- The disclosure is made in the prescribed form and manner.
2. Official objection
The second lifeline offered to taxpayers around their tax affairs is an official objection.
If a taxpayer is unhappy with an assessment or decision issued by SARS, they have the right to object. An objection must be submitted within 80 business days after the date of the assessment or SARS decision.
The objection can relate to a host of decisions by SARS, including penalties:
- Late payment penalties for VAT, PAYE, Unemployment Insurance Contributions (UIC) and Skills Development Levies (SDL);
- Late payment penalties on provisional tax;
- Late payment interest on provisional tax;
- Late payment interest on VAT and PAYE (not UIF or SDL);
- Late submission/non-submission penalties on PIT, CIT and PAYE, etc.
However, objections cannot be made on a self-assessment (like VAT and PAYE) where SARS has not raised a revised assessment.
3. Compromise agreement
Tax Consulting noted that there is a third option for relief with SARS, which can be pursued by taxpayers who no longer qualify for the VDP and don’t have the legal merits for an objection.
Where a taxpayer has failed even to file their tax returns, and their apprehension in meeting this legal obligation stems from the insurmountable nature of the ensuing tax debt, they can apply for a compromise.
A debt compromise is an agreement between SARS and the taxpayer in which the taxpayer undertakes to pay a portion of the total debt, and SARS accepts this in full and final settlement of the entire debt. SARS will write off the remainder of the debt, provided the taxpayer fulfils its payment undertaking and adheres to any additional conditions, such as future compliance.
“Where a taxpayer does not have legal merits to pursue an objection or does not meet the voluntariness or compliance requirements of a VDP, but has difficulty in settling their tax debt, a Compromise of Tax Debt application may be available,” Tax Consulting said.
“The compromise is aimed at aiding taxpayers to reduce their tax liability by means of a Compromise Agreement, which is entered into with SARS.
“Where SARS is approached correctly, and the taxpayer’s financial circumstances warrant it, a tax debt can be reduced, and the balance paid off in terms of the compromise.”
According to the group, SARS officials have indicated that for tax debts below R5 million, the likelihood of a compromise being reached is high, while the evidentiary burden is low.
SARS said that taxpayers who are not able to pay their tax debts will need to contact the service “without delay”.
“In certain circumstances we can reach an agreement with you to defer your tax debt for later payment or for payment by instalments,” it said.
However, taxpayers should note that SARS has the option to deny the request, and that interest will accrue on any unpaid debts.
“If you don’t adhere to the conditions of the payment arrangement the payment agreement will be terminated and normal collection proceedings will resume,” it said.
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