How to Pay SARS Debt: Payment Arrangements & Settlement Guide 2025

Owing money to SARS can be stressful, but there are legitimate ways to manage and settle your tax debt. This comprehensive guide covers payment options, arrangements, debt compromise, penalties, and step-by-step processes for resolving SARS debt in 2025.

Understanding SARS Debt

Types of Tax Debt

Common SARS debts include:

• Outstanding income tax (ITR12)
• Unpaid provisional tax
• VAT arrears
• PAYE debt (employer obligations)
• Customs and excise duties
• Penalties and interest

How SARS Debt Accumulates

Primary causes:

1. Underpayment of provisional tax
2. Late filing penalties
3. Administrative penalties
4. Interest on late payments
5. Incorrect tax estimates
6. Audit assessments

Interest and Penalties

Interest rate: Currently 10.25% per annum

• Calculated daily on outstanding amount
• Compounds monthly

Administrative penalties:

• Late filing: R250 per month (max R16,000)
• Non-filing: Percentage-based penalties
• Understatement penalty: 5% to 200% of shortfall

Check Your SARS Debt Balance

Via SARS eFiling

Steps:

1. Log into eFiling at www.sarsefiling.co.za
2. Navigate to "SARS Correspondence"
3. Click "Statement of Account"
4. View detailed breakdown of debt

What you'll see:

• Original tax assessment
• Interest charges
• Penalties applied
• Payments received
• Current balance

Via SARS Branch

Required documents:

• South African ID
• Tax reference number
• Proof of address (if updating details)

Process:

1. Visit nearest SARS branch
2. Request statement of account
3. Verify all charges are correct
4. Query any discrepancies immediately

Via SARS Contact Center

Phone: 0800 00 SARS (7277)
Operating hours: Monday-Friday, 8am-4pm

Provide tax number and verify identity to get balance.

Payment Options for SARS Debt

Option 1: Immediate Full Payment

Best if: You can pay the full amount immediately

Payment methods:

• EFT (Electronic Funds Transfer)
• eFiling online payment
• SARS branch (cash, card, or cheque)
• Bank payment at designated banks

Benefits:

• Stops interest immediately
• Clears debt record
• Enables tax clearance certificate

Option 2: Payment Arrangement (Installment Plan)

Best if: You need 6-12 months to pay

How it works:

1. Apply via eFiling or at branch
2. Propose affordable monthly amount
3. SARS reviews and approves/counter-offers
4. Sign payment arrangement agreement
5. Make monthly payments on time

Requirements:

• Must be tax compliant
• Current tax returns filed
• Reasonable repayment proposal
• Typically limited to 12 months

Interest: Continues accruing on outstanding balance

Option 3: Debt Compromise Application

Best if: You genuinely cannot pay full debt

Definition: Request SARS to reduce or write off debt

Grounds for compromise:

• Financial hardship
• Insolvency
• Serious illness or disability
• Business closure
• Undue hardship if full amount paid

Success rate: Low - only for genuine hardship

Option 4: Suspension of Payment

Best if: Disputing the assessment

When available:

• You've objected to the assessment
• Dispute is under review
• Waiting for SARS response

Effect: Debt collection paused while dispute resolved

How to Apply for Payment Arrangement

Step-by-Step Process

Step 1: Prepare Financial Information

Gather:

• Bank statements (3 months)
• Proof of income
• List of monthly expenses
• Debt obligations
• Assets and liabilities statement

Step 2: Calculate Affordable Payment

Formula:
Monthly income - Essential expenses = Available for SARS

Example:

• Income: R15,000
• Essential expenses: R12,000
• Available for SARS: R3,000/month

Step 3: Submit Application

Via eFiling:

1. Log into eFiling
2. Go to "Payment Arrangement"
3. Select "Request Payment Arrangement"
4. Complete application form
5. Upload supporting documents
6. Submit and await response

At SARS Branch:

1. Complete Form LPD-01 (Payment Arrangement Application)
2. Attach financial documents
3. Submit to SARS branch
4. Receive reference number

Step 4: SARS Review (5-21 Days)

SARS will:

• Verify tax compliance status
• Assess affordability
• Review payment history
• Approve, reject, or counter-propose

Step 5: Agreement and Payments

If approved:

• Sign payment arrangement agreement
• Receive payment schedule
• Make payments via agreed method
• Keep proof of all payments

Payment Arrangement Terms

Typical conditions:

• Maximum 12 months duration
• Interest continues accruing
• Must stay tax compliant
• Future returns filed on time
• Cannot miss payments

Default consequences:

• Arrangement cancelled
• Full debt becomes due immediately
• SARS may take enforcement action

Debt Compromise Application Process

When to Apply

Valid reasons:

• Financial hardship: Cannot afford even minimal payments
• Liquidation/sequestration: Business/personal insolvency
• Deceased estate: Estate cannot cover tax debt
• Serious illness: Unable to work/earn income
• Hardship: Paying would cause undue hardship

Required Documentation

Comprehensive proof needed:

Personal finances:

• 6 months bank statements
• Payslips or income proof
• List of all creditors
• Asset declarations
• Medical reports (if applicable)
• Insolvency documents (if applicable)

Business finances:

• Financial statements (3 years)
• Cash flow projections
• Creditor list
• Business rescue documents
• Liquidation papers

Application Process

Step 1: Complete ADR-1 Form

Download from SARS website:

• Alternative Dispute Resolution Form (ADR-1)
• Debt Compromise section

Step 2: Prepare Detailed Motivation

Explain:

• Why you cannot pay
• Efforts made to pay
• Current financial position
• Future payment ability
• Proposed settlement amount (if any)

Step 3: Submit Application

Options:

• Via eFiling (scan and upload)
• Email to designated SARS office
• Hand deliver to SARS branch
• Registered mail

Step 4: SARS Assessment (30-90 Days)

SARS will:

• Verify information provided
• Conduct affordability assessment
• May request additional information
• Provide preliminary decision

Step 5: Negotiation

If not rejected outright:

• SARS may counter-offer
• Negotiate settlement terms
• Agree on payment (if any)

Step 6: Final Decision

Possible outcomes:

• Full compromise: Debt written off
• Partial compromise: Pay reduced amount
• Rejected: Must pay full amount
• Payment arrangement: Alternative offered

Success Tips for Debt Compromise

✅ Be completely honest about finances
✅ Provide thorough documentation
✅ Show efforts to pay
✅ Demonstrate genuine hardship
✅ Be realistic in proposals
✅ Seek professional help if needed

❌ Don't hide assets
❌ Don't exaggerate hardship
❌ Don't delay filing returns
❌ Don't ignore SARS communications

SARS Debt Collection Actions

Warning Letters and Notices

Sequence of communications:

1. Initial assessment letter (debt created)
2. First demand letter (21 days)
3. Final demand letter (10 days)
4. Notice of intent to collect (10 days)
5. Collection action begins

Debt Collection Methods

SARS has broad powers:

1. Salary Attachment

• SARS instructs employer to deduct from salary
• Can take significant portion of income
• Continues until debt paid

2. Bank Account Attachment

• SARS can freeze bank accounts
• Withdraw funds directly
• No court order required

3. Asset Seizure

• SARS can attach property
• Sell assets to recover debt
• Includes movable and immovable property

4. Business Closure

• Withdraw VAT registration
• Refuse tax clearance
• Cannot trade without compliance

5. Civil Judgment

• SARS can get court judgment
• Becomes credit record default
• 5-year credit impairment

6. Criminal Prosecution

• Intentional evasion is criminal
• Can result in jail time
• In addition to paying debt

How to Avoid SARS Debt

Proactive Measures

1. Accurate Provisional Tax Estimates

• Conservative income projections
• Review quarterly
• Pay slightly more rather than less

2. Timely Tax Return Filing

• File before deadline
• Avoid late filing penalties
• Check calculations carefully

3. Regular eFiling Monitoring

• Check statements monthly
• Respond to SARS queries quickly
• Verify refunds/payments

4. Set Aside Tax Money

• Separate savings account
• 30-40% of income (self-employed)
• Don't spend tax funds

5. Professional Tax Advice

• Annual tax planning
• Complex situations
• Business tax compliance

Dealing with SARS Disputes

If You Disagree with Assessment

Options available:

1. Request for Reasons

• Understand why SARS assessed you
• 30 days to request
• SARS must respond

2. Objection

• Formal dispute of assessment
• 30 days from assessment (or 80 days for serious reasons)
• Submit via eFiling
• Payment suspended during objection (may need to apply)

3. Alternative Dispute Resolution (ADR)

• Less formal than objection
• Faster resolution
• SARS mediator assists

4. Tax Court Appeal

• If objection rejected
• Formal court process
• Legal representation advised

Suspension of Debt During Dispute

How to apply:

1. File objection
2. Complete "Request for Suspension" form
3. Provide grounds for suspension
4. SARS reviews and decides

Grounds for suspension:

• Prima facie case (strong argument)
• Would suffer irreparable harm
• Can provide security if required

Payment Methods Explained

EFT Payments

SARS Banking Details:

• Bank: Standard Bank
• Branch: Pretoria
• Branch Code: 051001
• Account Number: Provided on eFiling

Reference: Your tax number + payment type

Proof: Keep payment confirmation

eFiling Online Payments

Steps:

1. Log into eFiling
2. "Payments" section
3. Select debt type
4. Enter amount
5. Complete payment via card/EFT
6. Save payment reference

Advantages:

• Instant allocation
• Electronic proof
• Trackable online

SARS Branch Payments

Accepted:

• Cash (up to certain limits)
• Debit/credit cards
• Cheques (on SARS account)

Process:

1. Visit branch with debt details
2. Complete payment slip
3. Make payment
4. Receive official receipt

Bank Payments

Designated banks accept SARS payments:

• Standard Bank
• ABSA
• FNB
• Nedbank

Process:

1. Use internet banking or branch
2. Select SARS as beneficiary
3. Use correct reference number
4. Keep proof of payment

Tax Clearance with Outstanding Debt

Impact on Tax Clearance

General rule: Tax clearance refused if debt exists

Exceptions:

• Payment arrangement in place and up to date
• Dispute under review (with suspension)
• Debt below threshold (currently ~R100)

How to Get Tax Clearance with Debt

Option 1: Pay Debt in Full

• Fastest route
• Clearance usually issued within 2 days

Option 2: Arrange Payment Plan

• Apply for payment arrangement
• Once approved and first payment made
• Can request tax clearance
• May be issued provisionally

Option 3: Provide Security

• Bank guarantee for debt amount
• SARS holds security
• Clearance granted while debt outstanding

Professional Help Options

When to Seek Professional Assistance

Consider if:

• Debt over R50,000
• Multiple tax years affected
• Facing asset seizure
• Criminal investigation underway
• Complex business tax issues
• Previous payment arrangements failed

Tax Practitioners and Attorneys

Services offered:

• Debt negotiation with SARS
• Payment arrangement applications
• Debt compromise applications
• Dispute resolution
• Legal representation

How to find:

• Registered tax practitioners: www.sait.org.za
• Tax attorneys: Law Society website
• Check credentials and experience

Costs to Expect

Typical fees:

• Consultation: R500 - R1,500
• Debt review: R2,000 - R5,000
• Full representation: 10-20% of debt (or hourly rate)
• Contingency arrangements: Possible for debt compromise

Frequently Asked Questions

Q: How long does SARS take to approve payment arrangement?
A: Typically 5-21 business days after submission with complete documents.

Q: Can I negotiate the interest and penalties?
A: Interest is generally non-negotiable. Penalties may be remitted in limited circumstances (serious hardship).

Q: What happens if I miss a payment arrangement installment?
A: Arrangement may be cancelled. Contact SARS immediately to explain and request reinstatement.

Q: Does SARS debt prescribe (expire)?
A: Tax debt prescribes after 3 years if SARS takes no collection action. However, each communication restarts the period.

Q: Can I emigrate with SARS debt?
A: Debt doesn't prevent emigration, but SARS can pursue collection internationally under tax treaties.

Q: Will SARS debt affect my credit score?
A: Only if SARS obtains civil judgment. The debt itself isn't reported to credit bureaus.

Related SARS Guides

Essential Resources:

• SARS eFiling Guide
• Tax Return Submission Guide
• Provisional Tax Guide
• Tax Refund Tracking

Calculators:

• Income Tax Calculator
• PAYE Calculator

Conclusion

SARS debt is manageable if addressed promptly and honestly. Whether through immediate payment, payment arrangements, or debt compromise, options exist for most situations.

Key Takeaways:

• Act immediately when debt arises
• Communicate openly with SARS
• Maintain tax compliance
• Document all interactions
• Seek professional help for complex cases
• Never ignore SARS communications

The most important step is to engage with SARS rather than avoid the problem. Most SARS officials are willing to work with taxpayers who demonstrate genuine effort to resolve debt.