 A letter of demand from the taxman is like a financial fire alarm to jolt you into action to prevent the heat from turning into flames. But don’t expect any shrill sirens or flashing lights to alert you to the fact that you owe taxes. The SA Revenue Service (SARS) typically uploads the letter of demand on your eFiling profile and – provided you have updated your contact details – also sends an email or SMS notification. “Unfortunately, many taxpayers only realise they've received this when their bank account is already frozen or their salary garnished,” says Razael Manikus, COO at Latita Africa. “At that stage, it’s very serious but you can still solve the problem by acting immediately.”
What is a letter of demand? It’s a formal notice issued when SARS believes you owe tax. Often this debt is due to incorrect IRP5s or third-party data mismatches; unclaimed deductions not reflected correctly (such as medical aid or retirement contributions); undisclosed investment or rental income; penalties on late submissions or underpayments from previous years; or reversed refunds after a SARS audit. SARS often sends reminders before the official Final Letter of Demand, but these reminders are courtesy communications, not legally required steps. SARS can send SMSes, emails, or eFiling notifications reminding you of outstanding balances. These are not legal letters and don’t trigger the 10-business day enforcement countdown. The purpose is to give taxpayers a chance to settle before formal debt collection begins. The final (and only) letter of demand is the first legal step in SARS debt collection. This is issued via eFiling, email, or physical post to your registered address. This starts the 10-business day period before SARS can take enforcement action (e.g., bank account debit, salary garnishing, property attachment etc). What happens if you ignore it? SARS can, without further warning, deduct money from your income via garnishee orders to your employer or clients. The Revenue Service can also attach your bank funds, withhold tax clearances and refunds, and get a court judgment that will blemish your credit record. In cases of repeat non-compliance, SARS can even refer you to the National Prosecuting Authority. Assess your situation Log into your SARS eFiling profile to check the date when the letter of demand was issued (under ‘Correspondence’). That’s the start of your 10-business-day response window. Review your statement of account to identify the source of your debt and the tax period involved. If the amount is correct and you’re able to pay, do this immediately. Use the payment reference number on the letter to pay SARS. Pause the problem Apply for a suspension of payment, if you can’t pay or need breathing space before disputing the amount. This legal mechanism doesn’t cancel the debt but pauses SARS’s ability to collect. You can apply for a suspension of payment via eFiling or your tax representative. Attach a statement of financial hardship and your latest bank statements, or a note explaining your intention to dispute. Make a plan If you accept your debt but can’t pay in full, SARS may agree to a deferred payment plan with instalments. Or you could negotiate a compromise of tax debt, where SARS reduces your debt if the full payment would cause you financial hardship. Dispute, if needed If you believe the assessment is wrong, lodge a formal notice of objection on eFiling. You have 30 business days from the original assessment. Clearly explain the reason for your objection, and attach supporting documentation (such as invoices, proof of payments, or bank statements). “SARS aren’t trying to trick you,” says Manikus. “They only want what’s legally owed to them.” It’s crucial to follow the correct procedures and timelines when receiving a letter of demand. Don’t assume the problem will resolve itself, instead speak to a qualified tax expert immediately, she says. Timing is everything. ENDS MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Latita Africa please visit: Website: https://latitaafrica.com/ LinkedIn: https://www.linkedin.com/company/latita-africa/?originalSubdomain=za Facebook: https://www.facebook.com/latita.africa/ X: https://twitter.com/latita_africa
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 South African taxpayers who withdraw from their two-pot savings will only be paid after settling any outstanding tax debt, except where payment arrangements have been made with SARS.
“Taxpayers need to know how their two-pot withdrawals are treated in relation to their tax debt to avoid being caught off guard,” says Thomas Lobban, Director at Ibex Consulting, a division of the Latita Africa group. This is in the wake of reports that some taxpayers have come away from their withdrawal attempt empty handed after SARS deducted outstanding amounts. Two-pot and tax debt When a fund administrator processes a savings pot withdrawal, they must request a tax directive from SARS that tells them how much tax to deduct. That tax directive can include an instruction to also deduct any available amount needed to settle a taxpayer’s outstanding tax debt. However, where they have already made arrangements with SARS to pay off or defer the debt, the pot will not be affected. Only the withdrawal amount itself will be taxed. Where no arrangement exists, some taxpayers could return home without their withdrawal, with no savings left, and still in debt to SARS! And, if the money was meant for the kind of financial distress the savings pot was created to alleviate, the taxpayer will be worse off than before. “This makes a debt arrangement with SARS highly desirable - it not only reduces the financial pressure on the taxpayer but also protects their emergency funds from being seized,” says Lobban. Do you owe SARS money? So, how does a taxpayer know if they are in debt to SARS? Like any debt, they will receive a letter of demand in the mail. Or, they can regularly check their eFiling profile online by:
Available payment arrangements When making payment arrangements to settle a tax debt with SARS, unless the amount can be legally challenged, taxpayers have two main options available to them: deferral of payment or debt compromise. Deferral of payment is simply an arrangement whereby the full debt can be paid off in agreed upon monthly instalments or settled at a later date. Debt compromise means the taxpayer can negotiate with SARS to settle a portion of the tax debt and have the rest written off, freeing them of the obligation. However, in both cases, the taxpayer needs to formally prove their inability to make payment and must meet a shopping list of requirements. At its discretion, SARS can decline the request, which is more likely if the taxpayer represents themselves inadequately. The low-risk approach “It’s not enough to plead poverty or play the victim - you need to approach SARS with a professional regard for their procedural and legal constraints,” says Lobban, noting that this is a complex process most taxpayers have no experience in. Engaging with a professional tax consulting firm - specifically one with a solid legal function - will increase the chances of being granted payment relief exponentially. “It’s always advisable to get guidance from a tax professional who has submitted many dozens of similar requests with a high rate of success,” says Lobban. ENDS MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Latita Africa please visit: Website: https://latitaafrica.com/ LinkedIn: https://www.linkedin.com/company/latita-africa/?originalSubdomain=za Facebook: https://www.facebook.com/latita.africa/ X: https://twitter.com/latita_africa  If you are in debt with SARS or received a notice of final demand, there’s no need for panic, says Thomas Lobban, Tax Legal Specialist at Latita Africa.
"You’re not the first and you won’t be the last; there are generally honest ways to get through this without taking big hits," he says. Which is exceptionally good news now that SARS is upping its debt collection game to never-before-seen levels of efficiency. A word of advice The first and most important step is for you to take action immediately. "The last thing you want is to stay shell shocked and just stand there like a deer in headlights," advises Lobban. "You must do something proactive right now." Because if you don’t, you can be sure SARS will. That includes collecting the tax debt from third parties, like your employer, your bank, your investment broker or anyone else who owes you a buck. SARS is also empowered, where necessary, to attach your assets in order to collect on the tax debt. So, tick-tock, time’s a-wasting. Clean the slate, bottom up The second step might simply be to admit that if you’re in trouble, you’ve either been trying to do it all yourself - and you’ve been getting it wrong. Or, you’ve been receiving poor advice and bad service from a tax advisor who’s not up to speed on tax or tax law themselves. You might even “know a guy”, and it goes belly-up (or worse, nowhere at all). That doesn’t mean you should blame yourself, only that you acknowledge it’s time for a radically new approach – working with someone who knows what they’re doing. Just recently, SARS Commissioner Edward Kieswetter mentioned 53 tax practitioners who remain non-compliant in their own tax affairs. This, he said, "explains, in part, how they advise their clients and why their clients are equally delinquent." Ouch. "There can often also be a correlation drawn between how well you resolve your tax debt and the competency of the tax advisor who mediated with SARS on your behalf," says Lobban. So, above all, perhaps don’t try to fix the problem using the same party that got you into it in the first place. Your options There are really only two conditions that make a difference: SARS got their sums or facts wrong, or SARS got their sums and facts right. If they are wrong, you can work with your new tax practitioner to dispute their assessment and bring the tax debt back to reality. If SARS is right, then you may face a tax debt that is onerous or downright unaffordable. However, you still have two saving graces at your disposal. Defer the debt First, you can negotiate with SARS to defer the debt, which means developing a payment plan that allows you to pay it off in reasonable instalments. Deferment is also handy in some cases where you intend to dispute the assessment, because of SARS’ "pay now, dispute later" policy – it can cushion you from an immediate and possibly unaffordable full settlement. Compromise the debt Second, if you qualify, you can enter into a tax debt compromise agreement with SARS in terms of section 200 of the Tax Administration Act. This allows you to reduce your tax liability, sometimes substantially. Be aware, though, that the compromise process involves an invasive assessment, requiring SARS to dig deeply into every aspect of your finances and personal wealth. And a final settlement must still be fair to the South African fiscus. Get the law on your side Any of these situations are best handled through a tax advisor with legal muscle to spare and a firm grasp of SARS’ often confusing and complex debt resolution processes. This is especially the case where there are other potentially problematic issues the taxpayer is facing. Many tax practitioners – especially newly minted ones – don't usually have legal expertise or the experience to negotiate effectively with SARS in sensitive matters. "But, rest assured that how well your practitioner deals with SARS will likely determine how beneficial the outcome is for you and how little stress you ultimately have to suffer," says Lobban. Now go beat this thing! ENDS MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Latita Africa please visit: Website: https://latitaafrica.com/ LinkedIn: https://www.linkedin.com/company/latita-africa/?originalSubdomain=za Facebook: https://www.facebook.com/latita.africa/ X: https://twitter.com/latita_afric |
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