If you cannot pay SARS, do not go quiet. SARS can take the money straight from your bank account, or from clients who owe you, through a third-party appointment, without going to court. But it also offers instalment payment arrangements under section 167 of the Tax Administration Act, and engaging early almost always produces a better outcome than silence.
Why silence is the worst plan
Ignore the letters and SARS's collection powers escalate: penalties, compounding interest, and ultimately a section 179 third-party appointment. That is a legal instruction to your bank, a client who owes you for a job, or even a tenant, to pay SARS out of your money before you see it. For a tradie, a letter like that landing at a main contractor is also a reputation problem. Early contact, by contrast, is treated as cooperation.
Instalment payment arrangements
A SARS official may agree to a payment plan under section 167 where, among other grounds:
- You have a temporary shortage of cash or assets that is reasonably certain to improve
- You expect income that will cover the debt
- Immediate collection would be uneconomical or unduly harsh
- You can offer adequate security
How to ask:
- On eFiling, open the outstanding debt on your Statement of Account and request a payment arrangement
- Or use the payment arrangement function on the SARS MobiApp
- Or call SARS on 0800 00 7277 (weekdays 09:00 to 16:30)
- Or use the regional debt management email channels (debt1 to debt5 @sars.gov.za, split by province; the list is on the SARS website)
Keep every instalment. SARS can cancel the arrangement the moment you miss one or your finances visibly improve.
Compromise of tax debt
In genuinely exceptional cases, where the full debt can never realistically be collected, the Tax Administration Act lets SARS compromise (write off part of) a tax debt. It demands full financial disclosure, SARS must be satisfied that collecting everything would cause serious hardship, and it is rare. Treat it as the last resort after a payment plan, not the opening move, and get a practitioner to drive it.
What the debt costs while it stands
- Late payment penalty: 10% of the unpaid assessed tax
- Interest: SARS's prescribed rate on underpayments, 10.25% per year from 1 March 2026. The rate moves with the repo rate, so check the current figure; it compounds against you either way
- Admin penalties for unfiled returns: fixed monthly penalties that recur for every month outstanding, scaling with income from R250 a month to R16,000 a month at the extreme
- Provisional tax shortfalls carry their own 20% underestimation penalty (see Provisional Tax Explained)
The knock-on: your compliance status
Outstanding debt or returns block your Tax Compliance Status (TCS) PIN, and without a compliant PIN you cannot be paid on government work or pass most tender compliance checks. For tradies doing municipal or public work, the tax debt quietly costs you contracts long before the sheriff is involved (see SARS Deadlines and Admin).
A practical sequence
- File every outstanding return first, even if you cannot pay: filing stops the admin penalties from stacking and unlocks the conversation
- Work out honestly what you can pay monthly
- Request the instalment arrangement through eFiling with that number
- Divert a fixed percentage of every incoming payment to tax from now on, so this is the last arrangement you need
Common mistakes
- Ignoring the first letter. Every later stage is more expensive and less negotiable.
- Not filing because you cannot pay. Filing and paying are separate; unfiled returns add penalties and block any deal.
- Agreeing to instalments you cannot keep. A broken arrangement burns goodwill and restarts collection.
- Borrowing at mashonisa rates to pay SARS. A section 167 arrangement is almost always cheaper money.
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