Facing tax debt is a significant concern for many South Africans, especially when financial stability is threatened. Fortunately, the Tax Administration Act 28 of 2011 offers two primary tax relief options: Compromise vs. Deferral—outlined as the Compromise of Tax Debt (Section 200) and Deferral of Payment (Section 167). In this guide, we explore these two options in depth to help taxpayers make informed decisions.ns.
A Compromise of Tax Debt allows a taxpayer to request SARS to reduce or entirely waive their outstanding tax debt. This option can provide much-needed relief but comes with strict requirements. To qualify, taxpayers must:
SARS reviews these factors thoroughly to decide whether a compromise is warranted, with an emphasis on the taxpayer's future compliance ability.
For those who do not qualify for a compromise, a Deferral of Payment may be suitable. This option allows taxpayers to settle their debt in structured installments over time, rather than paying the entire sum at once. Key elements of a deferral include:
Although it doesn't reduce the total debt, a deferral can provide manageable terms for taxpayers needing more time.
Choosing between a Compromise and a Deferral depends on several factors:
Gladness Mashilo, Senior Bookkeeper and Tax Consultant at Latita Africa, advises taxpayers to evaluate their financial circumstances when deciding between a compromise and a deferral. For instance, a compromise might benefit those unable to cover their full debt due to substantial financial challenges. In contrast, a deferral can support those who need additional time but can fulfill the entire debt.
Navigating tax relief options requires a clear understanding of one’s financial standing and available choices. At Latita Africa, we provide tailored solutions, including:
Choosing between compromise and deferral can have a lasting impact on financial health. Both options under the Tax Administration Act provide essential relief mechanisms, though they suit different needs. For personalised guidance on selecting the best approach, Latita Africa’s team of experts is here to help you navigate your options with confidence.
Visit Latita Africa's website to learn more about tax relief options and take control of your financial future.