What to Do If You Receive a SARS Letter of Demand

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JEREMY MAGGS: It’s that time of year again—tax season is here, often bringing with it a flurry of stress-inducing letters from Sars [South African Revenue Service]. Many taxpayers don’t realize there’s an issue until their bank accounts are frozen or their salaries are garnished.

Read: Tax Season: Don’t be that person

Joining us now is Razael Manikus, the chief operating officer of the tax consultancy Latita Africa, to help clarify what these letters signify and how to react before it’s too late. Welcome, Razael. Let’s start with what a Sars letter of demand actually is.

RAZAEL MANIKUS: A Sars letter of demand is the initial formal step in debt collection. You might have previously received SMS messages or emails informing you of unpaid taxes. Whether those claims are correct or not doesn’t matter; Sars has declared that you have an outstanding debt. Following this, you will receive a final letter of demand, initiating a ten-business-day countdown.

JEREMY MAGGS: Why do people frequently overlook that letter?

RAZAEL MANIKUS: Many fail to notice it primarily because they don’t check their eFiling regularly. They might have changed their phone numbers or email addresses and aren’t receiving the necessary communications. It’s crucial to ensure that your eFiling details and contact information are up to date and to check your eFiling frequently.

JEREMY MAGGS: You mentioned a ten-day window after receiving the letter. What should someone do as soon as they get one?

RAZAEL MANIKUS: The very first step is to reach out to Sars directly or consult a tax expert to understand what’s going on and why. This will allow you to determine whether you agree or disagree with Sars’s assessment of the debt.

JEREMY MAGGS: Immediate action is essential, isn’t it? Oftentimes, people don’t take that step, and the situation escalates.

RAZAEL MANIKUS: Correct. If you delay, the consequences can worsen. Sars has the authority to garnish your wages, freeze your bank accounts, withhold refunds, or seize assets. Acting swiftly is critical.

JEREMY MAGGS: We know that Sars is actively pursuing revenue collection, particularly as tax season approaches. Should we anticipate an increase in these letters being sent out, and subsequently, more concern from taxpayers?

RAZAEL MANIKUS: Yes. Sars has allocated R7.5 billion to enhance its collection efforts, hiring around 1,200 new staff. They’ve invested nearly R100 billion in AI technology, enabling them to aggressively pursue outstanding debts. So yes, Sars is ramping up its operations.

Read: AI powers Sars efficiencies, says Kieswetter at G20 Zimbali meet

JEREMY MAGGS: If someone’s account is already frozen, is it too late to take action?

RAZAEL MANIKUS: No, it’s not too late. Even if your account is frozen, Sars is open to dialogue. There are various options available, including compromises and deferred payments. They are willing to listen and find a solution.

JEREMY MAGGS: So, it’s indeed possible to negotiate or arrange payments in installments?

RAZAEL MANIKUS: Absolutely, yes you can.

JEREMY MAGGS: Is there a way to halt Sars’s actions while you work things out, or is their movement inevitable?

RAZAEL MANIKUS: It largely depends on the circumstances. If they’ve already issued a final demand and the ten days have elapsed, Sars will proceed. However, if you act promptly after receiving your final demand, there are many ways to negotiate and potentially halt further actions.

JEREMY MAGGS: Given Sars’s ambitious targets, are all taxpayers at risk of receiving such letters if they owe money, and not just specific groups?

RAZAEL MANIKUS: Absolutely. Every taxpayer, whether from a small town or a large corporation, is part of this broader initiative by Sars. It’s a comprehensive approach.

JEREMY MAGGS: How accurate is the amount they claim you owe? What if you disagree with their calculations?

RAZAEL MANIKUS: If you dispute the amount, you can definitely reach out to Sars. There are processes in place where you can explain your disagreement. Sars will consider your input and may adjust their figures based on your feedback, or they might reaffirm their position based on their assessments.

JEREMY MAGGS: What are the risks involved if someone chooses to ignore such a letter?

RAZAEL MANIKUS: [Chuckle] Ignoring it can lead to various harsh outcomes, such as garnished wages, which reduces your take-home budget. If you are due for a refund from Sars, that may be withheld. Additionally, Sars can apply for judgments or levy against your assets. Ignoring them could result in significant losses.

JEREMY MAGGS: What’s your final advice for those who receive such letters? I presume it’s to act quickly to avoid severe repercussions.

RAZAEL MANIKUS: Exactly. Receiving a final notice isn’t the end; it merely marks the start of a countdown. There are steps you can take to improve your situation. But yes, I completely agree—act quickly and decisively.

JEREMY MAGGS: Lastly, what are the common reasons taxpayers receive these letters? I imagine there’s a range of issues involved.

RAZAEL MANIKUS: Indeed. Common reasons include failure to file tax returns. Sars often relies on auto-assessments based on what they believe to be accurate information or historical data.

Read: As Sars steps up enforcement, is your business ready for increased scrutiny?

So if you’ve previously worked and earned an income but no longer do, they will base their assessments solely on past data. Therefore, it often results from either a lack of filing or Sars’s auto-assessments.

JEREMY MAGGS: Thank you for your insights. The warning has been duly noted. Razael Manikus, chief operating officer of the tax consultancy Latita Africa, I appreciate your time today.

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