Keeping in good standing with the South African Revenue Authority (‘SARS’) is of the utmost importance for good corporate citizens. Managing this relationship is something most taxpayers are well versed with. However, what happens when you are faced with extraordinary circumstances, and when the landscape has changed due to events beyond your control?
Challenging as a situation may be, in order to avoid the imposition of interest and penalties it will be crucial for taxpayers to carefully manage the payment of their tax debts to the SARS. This article considers the available options to taxpayers.
Instalment payment agreements where taxpayers cannot afford to pay their tax debts in full
One way to manage the payment of tax debts to SARS is by entering into an instalment payment agreement with SARS where a taxpayer can demonstrate a shortterm cash flow problem and is unable to settle the tax debt in one payment.
Section 167(1) of the Tax Administration Act, No. 28 of 2011 (‘TAA’), provides that a senior SARS official may enter into an agreement with a taxpayer in the prescribed form under which the taxpayer is allowed to pay a tax debt in instalments within the agreed period, if SARS is satisfied that the relevant criteria or risks have been duly taken into consideration and the agreement facilitates the collection of the tax debt.
A senior SARS official will consider the following criteria for an instalment payment agreement in terms of section 168 of the TAA:
Before entering into an instalment payment agreement with the taxpayer, SARS will typically request financial information in order to confirm that the taxpayer is presently unable to settle the tax debt. This is done by requiring the taxpayer to complete a Collection Information Statement.
This calls for a wide range of financial information from the applicant, including:
It must be noted that the documents to be submitted to SARS must be comprehensive and must provide an accurate indication of the financial position of the taxpayer.
Where a taxpayer has an existing instalment payment agreement in place with SARS and foresees that it will be unable to meet the terms of the agreement, a taxpayer must be proactive and approach SARS for the purposes of modifying the existing agreement. Section 167(5) of the TAA provides that an instalment payment agreement may be modified if a senior SARS official is satisfied that:
Interest imposed by SARS
With respect to late payments of employees' tax and provisional tax, section 89bis(2) of the Income Tax Act, No. 58 of 1962 (‘ITA’), provides SARS with a broad discretion to remit the interest levied after ‘having regard to the circumstances of the case’ in question.
Please click here to read more.
This article first appeared on pwc.co.za.
Webinar Commentary
Further webinar commentary on Reducing SARS interest and penalties can also be accessed here: https://taxfaculty.ac.za/webinars_on_demand/show/2019-reducing-sars-penalties-and-interests