The current state of the economy in South Africa has given rise to an increase in revenue collection by the South African Revenue Service (“SARS”). One of the mechanisms utilized by SARS is the issuance of Final Demand letters to taxpayers in respect of outstanding tax debts.
These outstanding tax debts are not necessarily current tax debts and can comprise Income Tax, PAYE, VAT and other taxes. Final Demand letters can create panic as some taxpayers may not even realize that taxes are outstanding until they receive such communications from SARS.
Tax debt can result from various compliance related shortfalls including non-submission of a return, submitting a return without payment, partial payment, or assessments raised by SARS.
It is important to note that it is a criminal offense not to pay your taxes. If the taxpayer cannot settle the tax debt within the time frames prescribed by SARS, various solutions are available to taxpayers who find themselves in this situation.
The circumstances of each taxpayer will determine the appropriate remedy to be utilized by the taxpayer and typically includes payment of the entire tax debt, suspension of payments, instalment payment plans, Debt Compromise, etc.
It is advisable for taxpayers to review and ensure the accuracy of the amounts reflected in the letter of demand upon receipt thereof. Should you disagree with the alleged amount of tax debt due, you may lodge a dispute, subject to it being within the allowable time frames.
Due to the limited timeframes allowed to submit a dispute, taxpayers should attend to these as a matter of urgency. Taxpayers should contact their tax advisers to mitigate the risk of the financial impact where SARS proceeds with collections, judgments, and in other instances, the appointment of third parties by SARS in fulfillment of the tax debt owed.
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Article by: Claudia Steyn
Tax Compliance Manager