The Minister of Finance announced tax relief measures in an attempt to assist small to medium businesses in the face of Covid-19. But what tax relief is available to taxpayers who fall outside the ambit of these new measures?
Instalment payments
Taxpayers unable to pay tax debts due to economic instability caused by the pandemic may request and enter into an instalment payment arrangement with SARS. Certain criteria need to be met for taxpayers to qualify for this option. For example, where the taxpayer suffers temporary liquidity problems; and the instalment agreement is unlikely to prejudice tax collections.
Compromise of the tax debt
Another option available to a taxpayer experiencing financial difficulty is a compromise of the tax debt. This option entails an agreement being entered into between SARS and a ‘debtor’ wherein the debtor undertakes to pay a reduced amount in full satisfaction of the tax debt. SARS in turn, permanently writes off the remaining portion of the tax debt based on conditions that it may impose. The requirements of seeking to agree a compromise with SARS are fairly onerous and SARS will not agree to a compromise if SARS has a right to recover any tax from, for example, the personal assets of a shareholder of the company.
Settlement agreements with SARS
Taxpayers in a dispute with SARS can enter into a settlement agreement with SARS. The circumstances in which settlement is appropriate may include instances where the settlement would be in the interest of fairness and good management of the tax system or where there are complex factual issues and evidentiary difficulties.
Interest owed on late payments due to Covid-19
A further avenue of relief may arise if SARS is satisfied that interest is payable (on overdue tax) as a result of circumstances beyond the taxpayer’s control. The “circumstances” include a natural or human-made disaster, a civil disturbance or disruption in services or a serious illness or accident. Situations may arise where interest is payable by taxpayers if they cannot pay their taxes on time due to Covid-19 and the lockdown. It may be possible to apply to SARS asserting that Covid-19 is a man-made or natural disaster and the concomitant lockdown is a civil disturbance or disruption in services which resulted in the taxpayer’s inability to pay the tax on time. As things currently stand it would not be possible for the taxpayer to request that interest be waived in the circumstances where the late payment of tax merely arises because of cash-flow problems in the business unless they can show that the cash-flow problem is related to the Covid-19 outbreak and the lockdown.
Vivian Spies is the Associate Designate and Mpho Duiker is a Candidate Attorney at Norton Rose Fulbright.