Short answer
A payment arrangement lets you pay the full debt over time; a compromise asks SARS to accept less than the full debt. Payment arrangements are far more common. A compromise is only considered in limited circumstances, usually where the debt cannot realistically be paid in full.
At a glance
| Payment arrangement | Debt compromise | |
|---|---|---|
| What you pay | The full debt, over time | Less than the full debt |
| How common | Relatively common | Granted in limited circumstances |
| Best suited to | Viable businesses with a temporary cash-flow problem | Taxpayers who cannot realistically pay the full debt |
| Disclosure required | Financial information supporting affordability | Full disclosure of assets, liabilities and circumstances |
| Interest | Generally continues to run | Depends on the terms agreed |
When a payment arrangement fits
A payment arrangement is usually the practical choice when the business is fundamentally sound but cannot pay the full amount at once. Instalments are set with regard to what the business can afford, and the full debt is eventually settled.
When a compromise may fit
A compromise may be worth exploring when the debt is so large relative to the business’s means that even a long payment arrangement would not clear it, and SARS would likely recover less by pursuing the full amount.
How to choose
- Confirm the debt is correct — object where it is not.
- Work out realistically what the business can pay each month.
- If the debt can be cleared over a reasonable period, consider a payment arrangement.
- If it clearly cannot, assess whether a compromise is realistic.
The route you choose affects how SARS views future applications, so it is worth getting advice before applying.