Owing SARS money in 2025 – why your Christmas splurge could come back to bite you
South African taxpayers owing money to SARS—and try to claim financial hardship in negotiations to defer or write off their debts—may find that their past spending habits will come back to haunt them.
As South Africans start winding up for the new year, the South African Revenue Service has been hard at work, pushing its focus on detecting non-compliance.
While some taxpayers treated themselves to festivities, others may have found themselves on the naughty list, with the taxman continuing to push out Letters of Demand throughout the holidays.
According to tax experts at Tax Consulting SA, any taxpayers entering the new year with a red mark against their name with SARS should look at making a payment arrangement with the revenue service, or even look at having their tax debt written off, if possible.
What happens if you owe SARS money
Where a tax debt is rightfully due to SARS, the Debt Management Division will formally engage the defaulting taxpayer.
The usual methodology followed is the issuance of a Final Letter of Demand, setting out the amount owed and providing only ten business days for the taxpayer to pay up or face the collection consequences.
If a taxpayer fails to comply, SARS can appoint third parties to recover the tax debt from the taxpayer, whether through civil judgments and execution, or deductions made directly from the taxpayers’ bank accounts.
This means that taxpayers’ bank accounts are not out of reach of the taxman. Third-party appointments force the appointed parties to recover the tax debt on behalf of SARS, including banks and financial institutions.
The Letters of Demand, however, mention certain mechanisms available to taxpayers to resolve their tax debt.
What options are available to resolve tax debt
According to Tax Consulting, where a taxpayer simply cannot afford to settle their tax debt, it is crucial they approach SARS in the legally correct manner, to successfully request the appropriate debt relief from SARS.
“Taxpayers who find themselves in this situation do have solutions available to them, but none so favourable as an application for a compromise of tax debt, which SARS has, in recent times, become more amicable toward, showing great compassion for the financially constrained taxpayer,” the group said.
To successfully compromise on the tax debt, the taxpayer needs to show current financial hardship, together with an estimation of their net worth.
It must, however, be borne in mind that prior lavish spending could be a kink in the armour SARS needs to decline the initial proposal and request quite a drastic increase in the settlement amount, including the write-off of interest and penalties which have been attributed to the capital amount owed.
The taxpayer then offers to settle (in part or in full) the capital amount owed to SARS, either by lump sum or instalment payments. This proposal, when accepted by SARS, must be reduced to writing.
It is also important to note that a compromise can be applied to any form of tax debt across all tax types, be it Personal or Corporate Income Tax, VAT and/or PAYE, regardless of whether it is for an individual, trust or company.
There is relief available to all taxpayers who qualify for the compromise of tax debt.
Payment arrangements with SARS (Deferral of Payment)
Taxpayers who do not satisfy the requirements for a compromise but cannot afford to settle a tax debt in a lump sum payment, still have the option to apply and enter into a payment arrangement with SARS, which is known as a deferral of payment.
This is where the taxpayer applies to SARS, subject to certain conditions, for a payment agreement in which the taxpayer can settle the outstanding amount over monthly instalment payments over time.
This is an attractive option to many taxpayers, as it lessens the burden and reduces a large number that is expected to be settled immediately, to one that is manageable and paid in monthly instalments which are convenient to the taxpayer and SARS.
With a payment arrangement, most notably, interest and penalties are not written off, and the entire amount is settled in monthly instalments.
Tax Consulting said that while SARS offers these avenues for a fresh start—and a fair and balanced outcome—it requires that the taxpayer take the initiative.
“It is recommended that a request for compromise be made in a proactive manner, even before a Letter of Final Demand is received, rather than waiting for SARS to come knocking at your door,” it said.
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