Burying your head in the sand will not protect you from a tax debt owed to South African Revenue Service (SARS). The imminent threat to your bank balance will not simply “blow over”. You will likely resurface to find SARS has attached your savings, leaving you with no legal recourse for recovery.
Many companies, local celebrities and affluent individuals have learned that ignoring tax debts does not yield positive results. Hoping SARS will forget about your tax obligations will not work in your favour.
Some attempt business rescue proceedings to reduce SARS’ claim to taxes lawfully due to the revenue collector.
The case of JBSA Props (Pty) Ltd and Another vs Commissioner for the South African Revenue Services and Others (5009/2023P) [2025] ZAKZPHC 3 demonstrates this point.
Court’s tax debt decision supports SARS
The High Court tax debt decision supports SARS’ zero-tolerance for non-compliance. JBSA entered business rescue on 26 May 2020, and the process was terminated on 13 December 2021.
JBSA owed SARS approximately R24 million in VAT debt, with R9 million accruing before business rescue plan approval. The remaining R15 million accrued between plan approval and termination of business rescue.
The central issue was whether JBSA had established prima facie that their VAT debt from business rescue trading was compromised. JBSA argued that SARS had tacitly agreed to compromise the post-commencement tax debt. However, sections 200 to 204 of the Tax Administration Act, 28 of 2011, do not permit this assumption.
These provisions require any tax debt compromise to be written and signed by both a senior SARS official and the taxpayer. Since JBSA failed to meet this requirement, the court dismissed their application.
Available to legally resolve tax debt
Cutting tax debt requires a legal and correct approach to SARS from the start. A taxpayer without legal grounds to dispute the debt but struggling to pay may apply for a Compromise of Tax Debt.
The Compromise helps taxpayers reduce their tax liability through a legally binding Compromise Agreement with SARS. If SARS is approached correctly and the taxpayer’s financial situation justifies it, tax debt can be reduced.
The taxpayer then settles the remaining balance under the Compromise Agreement. To qualify for a tax debt compromise, a taxpayer must prove financial hardship and estimate their net worth.
Eligible taxpayers may first seek a write-off on interest and penalties. They then offer to settle the principal tax debt, either partially or fully, through lump sum or installment payments. SARS must accept the proposal, and the agreement must be in writing. A compromise applies to all tax debts, including Personal or Corporate Income Tax, VAT, and PAYE.
Individuals, trusts, and companies may all qualify for tax debt relief under a compromise agreement. Taxpayers who do not qualify for a compromise but cannot pay the full debt may request a payment arrangement. This alternative, known as a deferral of payment, allows structured payments over time.
Approach SARS before they approach your bank
SARS can instruct banks to empty accounts and settle tax debts without the account holder’s authorisation. This practice is not unusual and occurred in the JBSA case when Nedbank and Investec made direct payments to SARS.
Failing to cut a tax debt can result in severe financial consequences. Taxpayers facing unaffordable tax debt should act quickly to avoid additional interest and penalties. A Tax Attorney experienced in tax debt negotiations can provide protection and guidance. These professionals help navigate available tax debt relief solutions effectively.
Jashwin Baijoo | Head | Strategic Engagement & Compliance | Tax Consulting SA | mail me |
