Who qualifies for a tax debt compromise?

43984, 04 Sep. 2014

Tags: sars, tax debt compromise

A tax debt compromise is a request to SARS asking it to “park” any outstanding tax debt if you’re financially distressed.
By parking the debt, SARS will agree not to demand payment. Whether all, or only part of a tax debt is parked will depend on your financial circumstances and how much SARS can realistically recover.
One question that always crops up regarding tax debt compromise is who qualifies for it? And if there’s any criteria you must meet?
Read on to find out the answer so you can use tax debt compromise to your advantage to minimise the risk of the debt coming back to haunt you in the future.

The following entities qualify for a tax debt compromise and can apply for it
Any taxpayer with an outstanding tax debt can apply for a tax compromise.
This means individuals, companies, close corporations, Trusts, partnerships, cooperatives and non-profits qualify for a tax debt compromise.
You can apply for a tax debt compromise at any time during a tax year and you must do so as soon as you realise you can’t pay your outstanding tax debt to SARS.
Note: A tax debt consists of the following three elements and all three can be part of your tax compromise:
  • Actual tax you owe to SARS;
  • Penalties you owe SARS; and
  • Interest you owe SARS.
Remember, a tax debt compromise is for taxpayers who legitimately can’t pay their tax debt
In addition, the tax compromise is for taxpayers who have no prospect of paying their tax debt in the near future (within 12 months).
It isn’t a mechanism you can use when you don’t have money in the bank now or need to spend money you have on other things (like paying staff).
There you have it: If you’re financially distressed, use a tax debt compromise to your advantage especially now that you know who qualifies.

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