Why Get Rid of SARS Debt
The purpose of this article is not to promote not paying taxes. However, if your business is in arrears with SARS taxes as well as penalties and admin fees, the debt is simply too expensive even if the company would like to repay the debt. It can be more financially wise to liquidate a company that owes SARS and start over with a clean slate than it is to pay the debt. It is a matter of deciding whether the company is going to be crippled in trying to pay the expensive SARS debt or is it going to get rid of the debt by liquidation to be able to survive.
SARS Can Take Your Cashflow
No notice is given to you before SARS debits your bank account. You can lose all your cashflow because SARS does not show any mercy: they take all the money in the account when they feel like it at any time when they feel like it.
If you Liquidate before that happens and you trade in a new entity, your cash will be safe. This is the good reason to restructure your business and liquidate the old one to get rid of SARS and other debt.
Options to Deal With SARS Debt
When there is SARS debt, especially historical SARS debt, the question is what are the options to handle it. First, one can pay the debt. If the company cannot pay the debt, the second option is to try and enter into a deferred payment arrangement with SARS (to pay the debt off) or to enter into a compromise with SARS. In our experience, SARS’ expectations on a repayment term or a compromise not only takes very long it is also unrealistic. Most of the time it is far cheaper and less cumbersome to liquidate the company and restructure.
Company Liquidation versus SARS Legal Action
By initiating the company liquidation process in South Africa, you can halt the accumulation of debt and penalties. Liquidation offers an opportunity to settle your debts, including those owed to SARS, and allows you to start fresh with a new company. After liquidation, your business can operate without the weight of past financial burdens, including SARS debt.
Failing to act could have severe consequences. SARS has the authority to debit your business’s bank account without prior notice. In this situation, your business could lose all its cash flow, leaving you with no funds to operate. Liquidating the business early in the process prevents this risk and enables you to take control of your financial future.
Can Directors Be Held Personally Liable for the Debt of the Company
Many business owners worry about whether they can be held personally liable for SARS debt. In certain cases, SARS can hold directors accountable, but this only happens if SARS can prove that the directors were negligent in failing to pay taxes. While SARS does not yet pursue every director in arrears, they have indicated their intent to do so more aggressively in the future.
Therefore, acting quickly by considering voluntary liquidation South Africa can increase the chances that SARS will close the company’s file without pursuing directors personally. The longer you wait to address SARS debt, the greater the chance of facing personal liability.
