There are provisions in the Tax Administration Act, 2011 which
allow the South African Revenue Service (SARS) to enter into an
agreement with a taxpayer where he may within an agreed period, pay
a tax debt in one sum or in instalments.
Certain criteria must be met before a senior SARS official can
conclude an instalment payment agreement. The taxpayer must suffer
from a deficiency of assets or liquidity which is reasonably
certain to be remedied in the future. Notwithstanding this
deficiency, the taxpayer must anticipate that there will be income
or other receipts which can be used to satisfy the tax debt. At the
time of concluding the agreement the prospects of collecting the
tax debt must be poor or uneconomical, but likely to improve in the
future. Moreover, the deferral should not prejudice the collection
of the tax debt.
If the taxpayer is a company the SARS official is likely to
request security for payment of the tax debt in instalments. This
could be in the form of a personal surety from the director or
shareholder of the company. When signing a surety, the director or
shareholder must be mindful that their personal assets will be at
risk if the taxpayer defaults on the agreement.
The instalment agreement may contain conditions that SARS deems
necessary to secure the collection of the tax. SARS may also
terminate the agreement if a taxpayer fails to pay an instalment or
comply with its terms. Furthermore, the Tax Administration Act
allows SARS to modify or terminate the agreement if:
the collection of tax is in jeopardy;
the taxpayer furnished materially incorrect information in
applying for the agreement; or
the financial condition of the taxpayer has materially
If SARS terminates or modifies the agreement because the
taxpayer has not paid, complied with the terms, or the collection
of tax is in jeopardy, then such termination or modification will
be effective from the date stated in the SARS notice. If the reason
for termination or modification is the furnishing of materially
incorrect information or the change of the taxpayer's financial
condition, then the termination or modification is effective 21
business days after the notice is sent to the taxpayer.
What is apparent from the Tax Administration Act is that
taxpayers deferring payment of tax by an instalment payment
agreement must be certain that they can keep to the agreed payment
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The expansion of the West African regional market to foreign investors, and the search for emerging markets has led to a continuous increase in business mobility and cross border investments with Nigeria.
Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
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