The South African Revenue Service (SARS) has the legal authority to appoint third parties, such as banks, to recover outstanding debt on their behalf. This appointment is made in terms of the Tax Administration Act and can have serious consequences for those who fail to comply with it. In this blog, we will discuss the details of third-party appointments by SARS and what individuals need to know when faced with such a situation.
Understanding a SARS third party appointment
A third-party appointment is when SARS issues a notice to a bank or other financial institution, authorising them to deduct and pay outstanding debt owed to SARS from an individual’s account. This means that SARS has the power to access an individual’s funds directly, without their consent. This is a last-resort measure implemented by SARS when all other attempts to recover the debt have failed.
The Commissioner for the South African Revenue Service (SARS) has the authority to designate an agent who can settle a taxpayer’s outstanding tax using funds held on their behalf. Here are several essential facts to be aware of:
- If a taxpayer has unpaid tax debts, including penalties, the Tax Administration Act empowers the SARS Commissioner to appoint a third party to recover money owed by the taxpayer or held by a third party on behalf of the taxpayer (e.g., an employer or a bank).
- The Third Party Appointment process involves designating a third party (such as an employer, bank, or anyone managing the taxpayer’s income, funds, or assets) to collect outstanding taxes and administrative penalties on behalf of the taxpayer. The third party is responsible for remitting the relevant amount to SARS.
- If you ignore notices or demands regarding your outstanding tax debts, SARS may appoint your employer or another third party holding your funds or owing you money (e.g., salary, wages, or other remuneration) to pay the outstanding amounts to SARS.
- Failure of a third party to comply with the appointment may result in personal liability for the tax debt and potential legal consequences, including fines or imprisonment for up to two years.
There are serious consequences for third parties who do not adhere to the notice issued by SARS. It is a legal duty for the third party to comply with the notice and failure to do so can result in legal action being taken against them. Furthermore, if a third party does not comply, they may be held personally liable for the outstanding amounts due.
Reasons for Third party appointments:
SARS will only resort to third-party appointments if an individual has failed to respond to numerous penalty notices and reminders to submit returns and pay the outstanding debt. It is a last resort measure used by SARS to ensure that they can collect the amount due.
What if I don’t agree with the debt?
If someone has valid reasons for not filing returns or making payments, a dispute resolution process is available. This requires submitting the right form to SARS, not the bank.
To start a dispute, go to the SARS website and visit the “objections” and “appeals” pages. These areas guide you through the process of disputing a decision by SARS.
When disputing tax debt, remember you must still make payments. Penalties will accrue for any outstanding returns or payments, applied monthly for each.
Forms required for dispute resolution
There are various forms that individuals can use to lodge a dispute with SARS. It is important to note that an objection or appeal may be rejected if not submitted on the correct form. They can be found on the SARS website.
Waiving of penalties
If successful, SARS may waive the penalties or a part of them. However, this is not guaranteed and will depend on the specific circumstances of each case.
Third party appointments and banks
It is important to note that banks are not responsible for verifying the outstanding debt amounts or the validity of the third-party appointments. A process agreed upon by SARS and banks is followed, where the third-party appointments are sent to a centralised department at each bank. Individuals need to cooperate with SARS and their appointed third parties during this process.
How to seek further assistance
For more information or further assistance, individuals can visit the SARS website or contact the SARS Contact Centre on 0800 00 SARS (7277). It is important to have your reference number on hand when contacting SARS.
Conclusion
In conclusion, third party appointments by SARS are a last resort measure used to recover outstanding debt from individuals who have failed to comply with their tax obligations. Failure to comply with the notice issued by SARS can result in serious consequences for both the individual and the third party appointed.
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