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Negotiate a tax debt write off with SARS if you can't pay

by , 06 February 2013
Companies struggle to pay off their tax debt if interest has been added to a long overdue account. If your company is one of them, follow Edcon's example. The clothing group just avoided a tax battle with SARS by reaching atax settlement agreement. Here 's how to approach SARS for a tax debt write off or a tax compromise agreement if your company doesn't have enough funds to pay off its tax debts.

Julius Malema's SARS tax woes  just won't stop.

Now, it turns out his Ratanang Family Trust wasn't registered for tax either, The Namibian reports.
 
Hoping to avoid similar protracted litigation, retail giant Edcon has chosen to settle its tax debts with SARS based on its'tax treatment of interest payable on the financing of the acquisition of the group by Bain Capital,'writes Sasha Planting on Moneyweb.
 
'We believe we were in compliance with applicable South African tax laws and regulations,' says Edcon CFO Mark Bower in Planting's article.
 
'Nevertheless, we perceived it to be beneficial to engage in settlement discussions and we entered into a tax settlement agreement with SARS.'
 
If you're in a similar boat, and you're struggling to pay SARS the tax debt you owe, there's help on hand!
 
If your company is in a similar situation, you can submit a request to SARS to write-off the tax debt you owe it, writes FSP Business.
 
But SARS won't grant you a tax debt write-off just because your business is having a tough month.
 
SARS will only write off your tax debt temporarily if it's uneconomical for it to chase the money. This is when the total cost of recovering the tax debt will exceed the amount that it'll recover from you now.
 
The following five factors will determine whether SARS writes off your tax debt or not:

1. The amount of your tax debt.
2. How long your tax debt has been outstanding.
3. The steps you've already taken to recover the  tax debt and the costs involved in taking those steps, including steps taken to locate or trace you.
4. The likely costs of continuing the action to recover the money, weighed against the actual return.
5. Your financial position, including assets and liabilities, cash flow and possible income streams.
 
If SARS doesn't allow a tax debt write-off, you can still apply for a tax compromise agreement, which lets you to pay the tax debt in instalments, adds FSP Business.
 
But this should be your last resort because your application for a tax compromise agreement could result in SARS auditing your family or business associates.

For more information on SARS' rules on writing off tax debt get your hands on the Practical Tax Loose Leaf. In the Practical Tax Loose Leaf  we've got a dedicated chapter on your tax payer rights. In it you'll discover

  • What are your rights when you're audited?
  • How long does SARS have to issue another assessment?
  • Tax evasion will get you 5 years in jail
Get the Practical Tax Loose Leaf here...

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