Receiving a Letter of Demand from SARS is never to be ignored, and often, where the correct response is not timeously delivered, spells the beginning of the end for the recipient taxpayer!

In their war on non-compliance, the revenue collector issues scores of final demands on a daily basis, effectively serving as a “warning-shot” or last chance, for taxpayers to remedy the non-compliance detected. Failure to do so may lead to SARS imposing severe punitive measures, including taking civil judgement against the defaulting taxpayer, or even criminal prosecution.

This final demand, or final request, may pertain to a number of items, each of which viewed in isolation, may spell the end for the offending taxpayer. This includes non-submission of tax returns or relevant information, or non-payment of a tax debt due to SARS, all of which have dire consequences!

Outstanding Tax Returns Could Take You Downtown

It may not necessarily be common knowledge, but non-submission of a tax return, is in fact a criminal offence under South African tax laws. If you are unaware of any outstanding tax returns, you can be sure SARS will remind you:

Excerpt from Final Demand to Submit Outstanding Returns

Depending on your record keeping capabilities, the timelines provided may not be do-able, and if so, it is recommended a specialist tax attorney is immediately engaged to negotiate extended timelines on your behalf. If you think that being late may not be a “big deal”, guess again, as failure to timeously respond could result in timeous jail-time for you:

Excerpt from Final Demand to Submit Outstanding Returns

21 business days may be enough time to submit your tax returns, when you have the correct “A-Team” in your corner, including a specialist tax attorney, accountant, and tax return specialist, but what if you had less time…

Audit, Verification or Relevant Information – Give SARS What They Ask For, OR Ask For A Reduced Sentence

When it comes to outstanding information, SARS may give you a chance to come clean, off the back of having already identified a “risk” when “conducting a compliance review of your tax affairs”, however, timelines are tight:

Excerpt from Request for Relevant Material

In these instances, regardless of your photographic memory, identifying the source, nature, and purpose of all transactions in question, sometimes spanning a period of 10 years, is neigh impossible, even if you are at the top of your field.

From a perspective of practicality, and in light of the detail needed by SARS, taxpayers often think taking longer is only reasonable, and surely the revenue collector will see it that way too; well, think again:

Excerpt from Request for Relevant Material

Should SARS be in a merciful mood, and you do not end up being a prisoner of war, you will certainly end up with an empty war-chest, as an adverse finding will follow, resulting in SARS issuing their own assessments, and the ensuing tax debt, becoming your financial downfall.

Tax Debt Torpedo – Power to Poverty in One Fell Swoop

As bad as prison may be, it still comes with 3 square meals a day, and a free gym membership, which is more than you will be left with once your non-compliance is finalised, and the ensuing tax debt is ripe for collection.

Where you have failed to submit your returns, SARS will raise Original Estimated Assessments. Where you have failed to submit relevant material, SARS will raise Additional Assessments based on their findings.

In both cases, the result is either a 2x2 cell, or, an insurmountable tax debt, which you are given only 10 business days to settle with the revenue authority:

Excerpt from Debt Management – Final Demand

Should you miss this Final Demand, the Sheriff of the Court will bring it to your attention when attaching your assets, alternatively, you may find out a bit sooner when you wake up with empty bank accounts.

SARS’ Compliance Snipers Never Miss

Upon receipt of a Letter of Demand, the first and foremost priority of the target is identifying the default which the demand pertains to. As this weapon is only the tip of SARS’ arsenal, it is recommended that taxpayers concede at this point, and immediately address the non-compliance highlighted, before the trigger is pulled.

Where you already find yourself in the sights of SARS’ Compliance Snipers, there is a first-mover advantage in seeking the appropriate tax advisory, and legal muscle. This will ensure the necessary steps are taken to protect your freedom and finances. However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed.

As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a strong multi-faceted tax, legal, and financial team – the “A-Team”. This will not only serve to safeguard you against SARS implementing collection measures but also being specialists in their own right, you will be correctly advised on the most appropriate solution to ensure your tax compliance.

Written by Jashwin Baijoo, Head of Strategic Engagement & Compliance at Tax Consulting SA