Ignoring tax debt is a big risk for taxpayers or business

Finding out that you owe the South African Revenue Service (SARS) money can be stressful, but ignoring tax debt is one of the riskiest things a taxpayer or business can do. Under the Tax Administration Act (TAA), SARS possesses vast enforcement powers—from garnishing bank accounts to handing debt over to external collection agencies and taking civil or legal action.

The good news? SARS provides several legal frameworks to resolve, delay, or reduce your tax liabilities if managed correctly and proactively. Here is what you need to know about owing SARS money and how to handle it step-by-step.

1. Check your exact tax balance

Before taking action, verify the precise amount owed and ensure all outstanding returns are up to date. You can verify your balance through:

• SARS eFiling or MobiApp: Log in and request a Statement of Account (SOA).
• USSD channel: Dial *134*7277# from your registered mobile number.
• SMS: Text Balance [ID/Passport Number] to 47277.

2. What are your options if you cannot pay in full?

If you cannot settle the total amount within the standard timeframe, SARS allows taxpayers to apply for structured relief under specific circumstances:

Option A: Payment instalment arrangement (Section 167 TAA)

If you suffer from temporary liquidity or cash flow issues but expect your financial situation to improve, you can apply for an instalment agreement to settle the debt over time.

• Key requirement: All outstanding returns must be fully submitted before SARS will consider an instalment plan.
• Important: Interest will continue to accrue on unpaid amounts until the debt is settled in full.

Option B: Debt compromise (Section 200 TAA)

If you face severe, long-term financial hardship and paying the full amount would cause irreversible insolvency, SARS may agree to “compromise”—meaning they permanently write off a portion of the tax debt in exchange for a partial payment.

• Key requirement: You must provide comprehensive documentation, including 12-month cash flow forecasts, detailed asset and liability statements, debtor age analyses, and recent bank statements to prove your financial position.

Option C: Suspension of payment (Section 164 TAA)

If you disagree with the assessment and intend to lodge a formal objection or appeal, filing a dispute does not automatically pause SARS’s right to collect (“pay now, argue later”). You must submit a formal Application for Suspension of Payment under Section 164 to hold debt collection in abeyance while your dispute is processed.

3. The risks of ignoring outstanding SARS debt

Failing to engage with SARS or defaulting on collection demands can trigger severe enforcement actions, including:

• Third-Party appointments (garnishee orders): SARS can instruct your bank, employer, or clients to pay your money directly over to SARS to satisfy the debt.
• External debt collector handover: SARS routinely hands overdue debt over to appointed external collection agencies.
• Civil judgments & credit blacklisting: SARS can issue a court judgment without your consent, leading to credit bureau blacklisting.
• Asset attachment & liquidation: SARS can obtain court orders to attach and sell your assets or initiate sequestration/liquidation proceedings.
• Criminal liability: Under Section 234 of the TAA, willful failure to submit returns or pay tax obligations carries potential criminal prosecution.

Let PRN Advisory & Tax Services manage your tax debt

Dealing with SARS debt collection or negotiating deferrals requires meticulous documentation and a firm understanding of tax legislation. A single procedural error or incomplete application can lead to a rejected request and immediate debt collection action.

At PRN Advisory & Tax Services, we act on your behalf to:

• Evaluate your financial position and structure viable instalment arrangements.
• Prepare comprehensive Section 200 Debt Compromise applications.
• Apply for Section 164 Suspensions of Payment when lodging disputes.
• Prevent third-party garnishments and manage correspondence with SARS collections.

Don’t wait for SARS to act. Contact our team today to resolve your tax debt efficiently.