SARS – request to compromise – What does it mean?

What does it mean SARS request to Compromise?

Do you know that you can submit a request to SARS to write-off the tax you owe it, either temporarily or permanently? And if you need some extra breathing room, you can request a compromise – an agreement allowing you to pay the debt in instalments.

Chapter 14 of the Tax Administration Act deals with the waiving of tax debt and compromises on debt owed to SARS by taxpayers. It may come as a surprise that SARS is willing to write off or reduce debts owed to them, but in specific situations, they do indeed – subject to the provisions discussed further below.

The term “compromise” is defined as an agreement;

• that is entered into between SARS and the taxpayer
• where the debtor undertakes to pay an amount which is less than the full amount of the tax debt due to SARS
• in full settlement of the debt
• SARS agrees to write off the remaining portion of the debt permanently.

The basis for the compromise is that, where a taxpayer is unable to pay the debt, SARS will secure the highest net return from the recovery of the tax debt. The request for a compromise must be initiated by the taxpayer and SARS requires detailed information in respect of the taxpayer’s financial affairs before making any decision as to whether the compromise will be accepted. When considering whether to enter into a compromise with the taxpayer, SARS will consider the history of payments by the taxpayer, past transgressions of tax law and the reasons why the taxpayer is unable to pay their debt in full.

SARS may also decide to waive an amount of tax debt temporarily if it is considered uneconomical to pursue the debt. In this situation, the debtor is not absolved from the liability but is given a reprieve from paying the debt for a specific period. SARS may decide to withdraw its decision to waive off the debt if it believes that circumstances have changed to make pursuing the debt feasible.

Hopefully, taxpayers won’t find themselves in situations where they need to compromise their tax debt, but should it be necessary, they are advised to approach SARS for a compromise, with the assistance from experienced tax consultants, like ourselves.

In our experience, SARS is willing to enter into compromises where the taxpayer is in financial distress and has no realistic possibility of settling its tax debt which will bring the taxpayer immediate financial relief.

If you require assistance with regard to any of the above, please do not hesitate to contact us