The tax compromise process is very simple, the challenge comes in when you prepare for the execution
A tax debt compromise is a request you make to SARS asking it to 'park' your outstanding tax debt if you're financially distressed.
By parking the debt, SARS agrees not to demand payment. It treats your debt as no longer due and payable. Whether it parks all or only part of your tax debt depends on your financial circumstances and how much it can realistically recover.
If you're thinking 'this process sounds simple enough', we agree. In fact, it only becomes challenging when you have to execute it.
But there's no need to panic. Today we explain everything so you can use this process to your advantage.
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 Handbook.
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.
Get your copy of the Practical Tax Handbook now.
Here's an overview of the tax compromise process
If you can't pay your tax debt and apply for a tax compromise, you have to make an offer to SARS for a settlement amount.
Only in cases of severe financial distress will SARS consider parking a tax debt in full.
This means, you have to look at your finances and determine the settlement amount so SARS can review it.
This process takes time and involves endless meetings and SARS scrutiny.
If SARS agrees, or is convinced, your settlement amount is the highest net return it can hope to get for the tax debt, it will probably accept it. If it disagrees with your settlement amount, you'll have to negotiate until you both agree.
And it's in your best interest to persist. Because, if your tax compromise doesn't succeed:
If you believe and can prove that the compromise will make the best of the bad situation you and SARS find yourselves in, don't give up.
SARS might immediately seek other action against you.
Your tax debt will still be due in full.
You may have to go through a SARS audit.
Once you agree on the settlement amount and SARS approves your tax compromise, the following will happen
You must sign an agreement setting out:
Once you make your payment, SARS will remove the remaining tax debt from your tax account (it will be 'parked').
The amount you'll pay;
An undertaking by SARS not to pursue the balance of the debt; and
Any other condition SARS imposes, including a condition that you comply with your obligations under any Act administered by SARS.
Just bear in mind that once the agreement is in effect, you must comply with its terms. If you don't, SARS WILL pursue you for the outstanding taxes due and it won't be too kind this time around.
Now that you have an overview of the tax compromise process, use it to your advantage if your company is in financial distress.
If you're about to apply for a tax compromise, get your hands on the Practical Tax Handbook. It covers everything you need to know about tax compromises and what you have to do to apply for one. AND make SARS stick to it.
Note: 3 of 2 votes