What do you do when SARS sends you a letter of demand for payment or, even worse, takes money directly from your bank account? 

This is the reality faced by many South African taxpayers and SARS is under pressure to collect as much as possible due to their budget shortfall. 

What is not well known, however, is that SARS is perhaps the most underrated debt collector in South Africa. SARS may not appear as an effective and threatening collector to the general public, but do not be fooled, SARS definitely is not all bark and no bite. Through various mechanisms written into the law, such as the letter of final demand, SARS may often take a considerable chunk of resources from the unsuspecting taxpayer. 

Letter of Final Demand

One letter you never want to receive from SARS, is a letter of final demand. SARS issues a letter of demand when a taxpayer has an outstanding amount owed on its taxes, demanding payment of the tax debt. This is the first step in SARS’ collection process, which process, if not attended to timeously, could result in the appointment of a third-party to collect the tax debt on behalf of SARS, or even the attachment of personal assets. The letter of demand is thus SARS’ legal and official warning which it uses to inform taxpayers of their obligation to comply before SARS flexes its muscles. 

Upon receipt of a letter of final demand, taxpayers are afforded 10 business days to respond, either by way of payment or through seeking a formal dispute process. SARS may, on some occasions, issue a final demand reminder after the 10-day period, just as an extended measure of grace, however, this is not a requirement on SARS’ behalf, and should not be relied upon. Once the initial 10 days have lapsed, SARS then legally has the right to issue a third-party appointment notice compelling collection of the outstanding debt by such a third-party. It is at this point that you may find yourself on the receiving end of SARS’ full wrath. 

Caught unaware

Letters of final demand and final demand reminders are often missed due to taxpayers not keeping a careful eye on their tax affairs. Taxpayers seldom realise that they have received the dreaded letter, in instances where they have not kept their contact details up to date with SARS, and as such, the letter is sent to an unattended mailbox. Furthermore, some taxpayers do not check their eFiling profiles regularly, if at all, in which event, it is easy to miss the final demand and other pertinent communication from SARS. Therefore, it is often the case where taxpayers are unaware of the collection measures that have been implemented against them, and only find out once it is too late.

Not the final blow

If you find yourself in receipt of a letter of final demand, it is not the final blow. A taxpayer should endeavour to understand where the outstanding tax debt amount has arisen from. An experienced tax consultant should perform a tax diagnostic, which entails an overall compliance overview and an in-depth investigation of the taxpayer’s eFiling profile. The results of the investigation will provide key insights into any outstanding amounts, which could result in a dispute or a payment arrangement of the tax debt. Whilst this is underway, the taxpayer can make use of the suspension mechanism which gives the taxpayer room to actively resolve its non-compliance, without the fear that SARS may proceed with the next steps in the collection process, following the letter of final demand. There are mechanisms within tax legislation that provide for SARS’ collection measures to be halted whilst the taxpayer is working towards a resolution of a disputed tax debt.

Tax Consulting SA has a specialist team, comprising of astute tax attorneys, tax practitioners and tax consultants, who have the expertise to attend to the final demand and keep the debt collector at bay, whilst providing you with the correct remedial advice in order to bring you to total tax compliance. Do not let SARS issue the final blow, address your letter of demand and tax debt immediately so you can be in control of your tax debt.

Written by Andre Daniels, Legal Manager: Tax Controversy and Dispute Resolution at Tax Consulting SA; and Joshua Torpey, Tax Attorney at Tax Consulting SA