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Be proactive and start to plan and search for solutions in order to repay the money owed to SARS. The problem will not go away by ignoring it or placing it on hold. Do not stop submitting returns even if you know you cannot make payments, it’s a criminal offense not submitting returns.
There are repayment mechanisms available to you, understand what they are, what they do and what your options are. Start to engage and use those mechanisms to find a solution that will allow you to become compliant once again.
Answer the phone. Do not ignore the call, the problem will not go away. Engage with the SARS official and explain your situation. Do not commit yourself to any payments and/or deadlines if you know you cannot achieve it.
A compromise application is administered under sections 200-202 of the Tax Administration Act. A compromise, if approved, will allow a taxpayer to settle their tax debt at a reduced amount.
An instalment payment agreement application is administered under section 167 of the Tax Administration Act. A deferment, if approved, will allow a taxpayer to pay its tax debt in installments within the agreed period of time.
A Tax Clearance Certificate can only be acquired once a taxpayer is compliant with SARS, therefore all returns must be submitted and no outstanding monies owed to SARS. Alternatively, if you have tax debt with SARS, you will need to reach a formal payment arrangement with SARS before a Tax Clearance Certificate can be obtained.
The Voluntary Disclosure Programme (“VDP”) is administered under sections 225-233 of the Tax Administration Act. The purpose of the VDP is to enhance voluntary compliance in the interest of good management of the tax system and the best use of SARS resources. The VDP aims to encourage taxpayers to come forward on a voluntary basis to regularise their tax affairs with SARS and avoid the imposition of understatement penalties and other administrative penalties.
This is a final demand from SARS to repay the debt and/or submit outstanding returns before further collection steps are taken. It is important to immediately engage on the matter and to use the repayment mechanisms available in order to halt further collection steps. If SARS receives no response from you within the allotted time on the final demand they will continue with their collection steps i.e. attaching money from your bank account.
A judgement is a court order made against a taxpayer and essentially gives SARS the authority to use the legal means available to them in order to collect the outstanding debt i.e. attaching and selling of assets, attaching and ordering debtors to pay any outstanding money over to SARS etc.
A company or close corporation is a legal entity in its own right, and debts incurred by the entity are its responsibility. As a general rule, the directors and shareholders of a company and the members of a close corporation are not personally liable for the entity’s tax and other debts if the entity turns out to be unable to pay them.
Personal liability for the entity’s debts will be incurred only where there is a piercing of the corporate veil, either at common law, or under statute. The Tax Administration Bill, Bill 11 of 2011 (the TAB) contains several provisions in terms of which directors, shareholders and members of companies and close corporations can incur personal liability for its tax debts.
A director or member does not become liable automatically. However, you will be liable for those debts of the company or close corporation for which you have signed surety, irrespective of whether you are a director or member.
If you have acted fraudulently or grossly negligent (i.e. by not paying your tax debt and/or submitting your tax returns), an application can be brought against you where the company veil will be lifted and you will be personally liable for all the company or close corporation’s debt.
The idea behind business rescue is a good mechanism for businesses to ensure their survival. However, due to the lack of checks and balances on the industry there has been abuse and bad reports on business rescue practitioners. At this point in time professional bodies are still considering licensing the practice of business rescue. There has been negative sentiment towards the practice where the business rescue practitioners use the opportunity to make a profit rather to ensure the survival of the business. Furthermore, once a business is placed in business rescue, the business rescue practitioner effectively takes over the responsibilities of Director or Member. The current Directors or Members have to effectively give over control to the business rescue practitioner. At this point in time there are other legal mechanisms available to achieve the same results as the business rescue mechanism, without giving up control of the business.