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Do you know the six questions SARS will ask you once you submit your tax compromise application?

by , 16 June 2015
After you submit your tax compromise application, SARS will analyse it and ask you several questions. Pay attention to the fact that if the answers to these questions are 'no,' then you stand a good chance of SARS undertaking your compromise:

•  Will SARS get more tax back by continuing to demand payment, or taking money out of your bank account?

•  Will SARS recover the outstanding tax debt from a third party like debtors who owe you money, debit owner loan accounts?

•  Will SARS get more money through the courts (considering the lengthy timeframe and costs involved) as opposed to the compromise?

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•  Will SARS get more money if they liquidated or sequestrated you (considering the lengthy timeframe and costs involved) than through the compromise?

•  Will compromising the tax debt result in SARS taking longer to recover a tax debt (or part thereof) than by any other means available to it?

•  Are there any other options available to SARS to recover the outstanding tax debt?

So since SARS is removing your obligation to pay an outstanding tax debt, it will want to know if the compromise will secure the highest net return on the outstanding tax debt.

We have to also explain that regarding the highest net return, SARS is ensuring it gets as much money into its bank account as possible

In other words, SARS won't just look at the money value on the date it receives your application, but it will also look at:

•  Possible detrimental economic consequences (e.g. If SARS denies you the compromise and liquidates your business, then 50 of your employees will be unemployed);

•  Potential for future tax being paid (e.g. you've had a tough four years, but have a number of lucrative contracts that will bring in a lot of money over the next five years, and your business will pay a lot of income tax);

•  Costs of the other options available to recover the tax debt (e.g. SARS could liquidate your company to try and get its money that way, but they realise the costs of liquidation will exceed the benefit from liquidation);

•  Timeframe of collection (e.g. SARS will collect some of the debt sooner through a compromise than if they undertook a lengthy court battle with you);


•  Abandonment of tax benefits (e.g. Instead of fighting for payment, SARS can abandon an assessed loss you might have so you can't deduct this from future taxable income).

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