Category: Chapter 14 – Write off or compromise of tax debts (TAA)

Section 203 (TAA) – Circumstances where not appropriate to compromise tax debt

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203.    Circumstances where not appropriate to compromise tax debt

 

A senior SARS official may not ‘compromise’ any amount of a tax debt under section 200 if-

 

(a)     the ‘debtor’ was a party to an agreement with SARS to ‘compromise’ an amount of tax debt within the period of three years immediately before the request for the ‘compromise’;

 

(b)     the tax affairs of the ‘debtor’ (other than the outstanding tax debt) are not up to date;

 

(c)     another creditor has communicated its intention to initiate or has initiated liquidation or sequestration proceedings;

 

(d)     the ‘compromise’ will prejudice other creditors (unless the affected creditors consent to the ‘compromise’) or if other creditors will be placed in a position of advantage relative to SARS;

 

(e)     it may adversely affect broader taxpayer compliance; or

 

(f)      the ‘debtor’ is a company or a trust and SARS has not first explored action against or recovery from the personal assets of the persons who may be liable for the debt under Part D of Chapter 11.

Section 204 (TAA) – Procedure for compromise of tax debt

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204.    Procedure for compromise of tax debt

 

(1)     To ‘compromise’ a tax debt, a senior SARS official and the ‘debtor’ must sign an agreement setting out-

 

(a)     the amount payable by the ‘debtor’ in full satisfaction of the debt;

 

(b)     the undertaking by SARS not to pursue recovery of the balance of the tax debt; and

 

(c)     the conditions subject to which the tax debt is ‘compromised’ by SARS.

 

(2)     The conditions referred to in subsection (1)(c) may include a requirement that the ‘debtor’ must-

 

(a)     comply with subsequent obligations imposed in terms of a tax Act;

 

(b)     pay the tax debt in the manner prescribed by SARS; or

 

(c)     give up specified existing or future tax benefits, such as carryovers of losses, deductions, credits and rebates.

Section 205 (TAA) – SARS not bound by compromise of tax debt

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205.    SARS not bound by compromise of tax debt

 

SARS is not bound by a ‘compromise’ if-

 

(a)     the ‘debtor’ fails to disclose a material fact to which the ‘compromise’ relates;

 

(b)     the ‘debtor’ supplies materially incorrect information to which the ‘compromise’ relates;

 

(c)     the ‘debtor’ fails to comply with a provision or condition contained in the agreement referred to in section 204; or

 

(d)     the ‘debtor’ is liquidated or the ‘debtor’s’ estate is sequestrated before the ‘debtor’ has fully complied with the conditions contained in the agreement referred to in section 204.

Section 206 (TAA) – Register of tax debts written off or compromised (TAA)

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206.    Register of tax debts written off or compromised

 

(1)     SARS must maintain a register of the tax debts ‘written off or ‘compromised’ in terms of this Chapter.

 

(2)     The register referred to in subsection (1) must contain-

 

(a)     the details of the ‘debtor’, including name, address and taxpayer reference number;

 

(b)     the amount of the tax debt ‘written off’ or ‘compromised’ and the periods to which the tax debt relates; and

 

(c)     the reason for ‘writing off’ or ‘compromising’ the tax debt.

Section 207 (TAA) – Reporting by Commissioner of tax debts written off or compromised

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207.    Reporting by Commissioner of tax debts written off or compromised

 

(1)     The amount of tax debts ‘written off’ or ‘compromised’ during a financial year must be disclosed in the annual financial statements of SARS relating to administered revenue for that year.

 

(2)     The Commissioner must on an annual basis provide to the Auditor-General and to the Minister a summary of the tax debts which were ‘written off’ or ‘compromised’ in whole or in part during the period covered by the summary, which must-

 

(a)     be in a format which, subject to section 70(5), does not disclose the identity of the ‘debtor’ concerned;

 

(b)     be submitted within 60 business days following the end of the fiscal year; and

 

(c)     contain details of the number of tax debts “written off” or “compromised” and the amount of revenue forgone, which must be reflected in respect of main classes of taxpayers or sections of the public.