Short answer
A SARS debt compromise is an agreement in which SARS accepts less than the full tax debt. It is only granted in limited circumstances — typically where recovering the full amount is unlikely and a compromise is a better outcome — and requires full disclosure of your financial position.
What a debt compromise is
A compromise allows a taxpayer to settle a tax debt by paying less than the full amount, with SARS agreeing to write off the balance subject to conditions. It is an exception, not a routine option.
When SARS may consider a compromise
SARS generally considers whether a compromise makes more sense than trying to recover the full debt. Factors typically include:
- Whether the taxpayer can realistically pay the full debt, now or over time.
- Whether the amount offered is more than SARS would likely recover otherwise.
- The taxpayer’s history of compliance and good faith.
- Whether the taxpayer will remain compliant going forward.
SARS will not generally consider a compromise where the taxpayer has acted in bad faith or not disclosed their full financial position.
What the application involves
A compromise application is detailed. It usually requires:
- A full statement of assets and liabilities.
- Details of income and expenditure, and cash-flow projections.
- An explanation of how the debt arose and why it cannot be paid in full.
- The amount offered and how it will be paid.
Conditions and risks
A compromise usually comes with conditions, such as remaining compliant with future obligations. If conditions are not met, or information provided proves to be incorrect, SARS may be entitled to reverse the compromise.
Consider the alternatives first
Because compromises are granted sparingly, it is worth considering whether a payment arrangement or an objection is a better route before applying.