Part B
Temporary write off of tax debt
Category: Chapter 14 – Write off or compromise of tax debts (TAA)
Section 195 (TAA) – Temporary write off of tax debt
195. Temporary write off of tax debt
(1) A senior SARS official may decide to temporarily “write off” an amount of tax debt-
(a) if satisfied that the tax debt is uneconomical to pursue as described in section 196 at that time; or
(b) for the duration of the period that the “debtor” is subject to business rescue proceedings under Chapter 6 of the “Companies Act”, as referred to in section 132 of that Act.
(2) A decision by the senior SARS official to temporarily ‘write off’ an amount of tax debt does not absolve the ‘debtor’ from the liability for that tax debt.
(3) A senior SARS official may at any time withdraw the decision to temporarily ‘write off’ a tax debt if satisfied that the tax debt is no longer uneconomical to pursue as referred to in section 196 and that the decision to temporarily ‘write off’ would jeopardise the general tax collection effort.
Section 196 (TAA) – Tax debt uneconomical to pursue
196. Tax debt uneconomical to pursue
(1) A tax debt is uneconomical to pursue if a senior SARS official is satisfied that the total cost of recovery of that tax debt will in all likelihood exceed the anticipated amount to be recovered in respect of the outstanding tax debt.
(2) In determining whether the cost of recovery is likely to exceed the anticipated amount to be recovered as referred to in subsection (1), a senior SARS official must have regard to-
(a) the amount of the tax debt;
(b) the length of time that the tax debt has been outstanding;
(c) the steps taken to date to recover the tax debt and the costs involved in those steps, including steps taken to locate or trace the ‘debtor’;
(d) the likely costs of continuing action to recover the tax debt and the anticipated return from that action, including the likely recovery of costs that may be awarded to SARS;
(e) the financial position of the ‘debtor’, including that ‘debtor’s’ assets and liabilities, cash flow, and possible future income streams; and
(f) any other information available with regard to the recoverability of the tax debt.
Part C – Permanent write off of tax debt (TAA)
Part C
Permanent write off of tax debt
Section 197 (TAA) – Permanent write off of tax debt
197. Permanent write off of tax debt
(1) A senior SARS official may authorise the permanent ‘write off’ of an amount of tax debt-
(a) to the extent satisfied that the tax debt is irrecoverable at law as referred to in section 198; or
(b) if the debt is ‘compromised’ in terms of Part D.
(2) SARS must notify the ‘debtor’ in writing of the amount of tax debt ‘written off’.
Section 199 (TAA) – Procedure for writing off tax debt
199. Procedure for writing off tax debt
(1) Before deciding to ‘write off’ a tax debt, a senior SARS official must-
(a) determine whether there are any other tax debts owing to SARS by the ‘debtor’;
(b) reconcile amounts owed by and to the ‘debtor’, including penalties, interest and costs;
(c) obtain a breakdown of the tax debt and the periods to which the outstanding amounts relate; and
(d) document the history of the recovery process and the reasons for deciding to ‘write off’ the tax debt.
(2) In deciding whether to support a business rescue plan referred to in Part D of Chapter 6 of the ‘Companies Act’ or ‘compromise’ made to creditors under section 155 of the ‘Companies Act’ a senior SARS official must, in addition to considering the information as referred to in section 150 or 155 of that Act, take into account the information and aspects covered in the provisions of sections 200, 201(1), 202 and 203 with the necessary changes.
Part D – Compromise of tax debt (TAA)
Part D
Compromise of tax debt
Section 200 (TAA) – Compromise of tax debt
200. Compromise of tax debt
A senior SARS official may authorise the ‘compromise’ of a portion of a tax debt upon request by a ‘debtor’, which complies with the requirements of section 201, if-
(a) the purpose of the ‘compromise’ is to secure the highest net return from the recovery of the tax debt; and
(b) the ‘compromise’ is consistent with considerations of good management of the tax system and administrative efficiency.
Section 201 (TAA) – Request by debtor for compromise of tax debt
201. Request by debtor for compromise of tax debt
(1) A request by a ‘debtor’ for a tax debt to be ‘compromised’ must be signed by the ‘debtor’ and be supported by a detailed statement setting out-
(a) the assets and liabilities of the ‘debtor’ reflecting their current fair market value;
(b) the amounts received by or accrued to, and expenditure incurred by, the ‘debtor’ during the 12 months immediately preceding the request;
(c) the assets which have been disposed of in the preceding three years, or such longer period as a senior SARS official deems appropriate, together with their value, the consideration received or accrued, the identity of the person who acquired the assets and the relationship between the ‘debtor’ and the person who acquired the assets, if any;
(d) the ‘debtor’s’ future interests in any assets, whether certain or contingent or subject to the exercise of a discretionary power by another person;
(e) the assets over which the ‘debtor’, either alone or with other persons, has a direct or indirect power of appointment or disposal, whether as trustee or otherwise;
(f) details of any connected person in relation to that ‘debtor’;
(g) the ‘debtor’s’ present sources and level of income and the anticipated sources and level of income for the next three years, with an outline of the ‘debtor’s’ financial plans for the future; and
(h) the ‘debtor’s’ reasons for seeking a ‘compromise’.
(2) The request must be accompanied by the evidence supporting the ‘debtor’s’ claims for not being able to make payment of the full amount of the tax debt.
(3) The ‘debtor’ must warrant that the information provided in the application is accurate and complete.
(4) A senior SARS official may require that the application be supplemented by such further information as may be required.
Section 202 (TAA) – Consideration of request to compromise tax debt
202. Consideration of request to compromise tax debt
(1) In considering a request for a ‘compromise’, a senior SARS official must have regard to the extent that the ‘compromise’ may result in-
(a) savings in the costs of collection;
(b) collection at an earlier date than would otherwise be the case without the ‘compromise’;
(c) collection of a greater amount than would otherwise have been recovered; or
(d) the abandonment by the ‘debtor’ of some claim or right, which has a monetary value, arising under a tax Act, including existing or future tax benefits, such as carryovers of losses, deductions, credits and rebates.
(2) In determining the position without the ‘compromise’, a senior SARS official must have regard to-
(a) the value of the ‘debtor’s’ present assets;
(b) future prospects of the ‘debtor’, including arrangements which have been implemented or are proposed which may have the effect of diverting income or assets that may otherwise accrue to or be acquired by the ‘debtor’ or a connected person in relation to the ‘debtor’;
(c) past transactions of the ‘debtor’; and
(d) the position of any connected person in relation to the ‘debtor’.