What is a tax compromise?
compromise is only for taxpayers who legitimately can't pay their tax
debt, and who have no prospect of paying their tax
debt in the near future (within 12 months).
Pay attention to the fact that this isn't a mechanism taxpayers can use when they just don't have money in the bank now. Or need to spend money they do have on other things (like paying staff).
How does the tax
compromise process work?
It's actually very simple, but the challenge comes in when you prepare for the execution. Here's the process you need to follow:
If you can't pay your tax
debt and apply to SARS for a tax
compromise, you'll make an offer to SARS for a settlement amount.
It's fairly straighforward unless SARS rejects you for one of the following reasons...
*********** Top Rated Product ***************
How much time do you spend looking for useful tax information? Do you need all the South African taxes analysed and explained in one easy location?
Now you can have all the information in one place: The Practical Tax Loose Leaf Service.
Over 500 pages compiled by our tax
experts, comprising of:
All the definitions and legal regulations, useful advice, exceptions to the rules that help you slip through the legislative jungle of taxes.
Case studies and practical examples that show you what elements you should consider for your taxes to be perfect.
Red flags you need to watch out for and the penalties you'll face if you don't respect them.
Sample templates at your disposal, ready to be filled in, customised and printed.
You will also get free access to the accountingandtaxclub.co.za. Here you'll find questions and answers on any tax
and accounting issues. You can also ask our experts a tax
Get your copy of the Practical Tax Loose Leaf Service now.
Here are the seven instances when SARS won't consider a tax
Before you start a tax
compromise application, it's important to note that in terms of Section 203 of the Tax Ammendment Act
, SARS won't even look at your application if:
1. You've already applied for (and were granted) a tax
compromise within the last three years from the date of your application;
2. Your tax
affairs aren't up to date;
3. You're already being sequestrated or liquidated by another creditor;
4. The compromise could prejudice other creditors (unless the creditors consent to the compromise);
5. The compromise could benefit other creditors relative to SARS;
6. The compromise could affect a broad range of taxpayer compliance. For example, SARS decides to overlook the fact that you're a terrible taxpayer, as you haven't submitted a tax
return since 1984. If it shows leniency to you, all other compliant taxpayers could see this as SARS being too lenient and they may not submit their returns because they're hoping SARS will just compromise the tax
7.If your business is a Trust or a company, SARS hasn't first explored action against recovering the tax
debt from the personal assets of anyone who's possibly liable (Chapter 11 of the TAA)
, which is collection of a tax
debt from trustees, shareholders, third parties, through the courts, or liquidation/sequestration.
Useful tip! To ensure your tax
compromise is granted, help SARS tick off all of these points by giving it sufficient and appropriate information to prove your case doesn't fall under one of these criteria.