For many businesses, the first real cost of SARS debt is not a penalty or a letter from SARS. It is a tender they cannot submit, a contract that stalls, or a finance application that will not proceed, because their tax compliance status is not in order.
This guide explains how tax compliance status works, how SARS debt affects it, and how to put it right before it costs you an opportunity.
What Tax Compliance Status Is
Tax compliance status is SARS's confirmation that a taxpayer's affairs are in order. Taxpayers request it on eFiling and receive a PIN, which they can share with third parties. The third party then uses the PIN to verify the taxpayer's status directly with SARS.
It is commonly required for:
- government and private-sector tenders;
- contracts where the other party must confirm you are tax compliant;
- certain licences and registrations;
- some finance applications; and
- approval for international transfers of funds.
SARS has consolidated the purposes it issues status for. The separate tender option no longer exists, and a good-standing status is now used wherever a third party needs to verify compliance.
What SARS Checks
SARS's compliance profile looks at three things:
- Registration: you are registered for the taxes that apply to you.
- Returns: you have no outstanding returns.
- Debt: you have no outstanding tax debt, unless a payment arrangement or a suspension of payment has been agreed with SARS.
The last point is what matters most for taxpayers with SARS debt. Owing money does not, on its own, make you non-compliant. Owing money with nothing formally agreed does.
Why Your Status Can Change After You Have a PIN
Compliance status is not a certificate frozen on the day it was issued. SARS's guidance is clear that a taxpayer's status changes with their continued compliance. A third party checking your PIN sees your status at the time they check.
In practice, this means a PIN obtained while you were compliant can show non-compliant weeks later if a return falls outstanding or a new debt arises without an arrangement. Businesses that rely on tenders should monitor their status continuously, not only when a bid is due.
How to Get Back to Compliant
File every outstanding return
Outstanding returns make you non-compliant regardless of your debt position, and SARS will generally not agree a payment arrangement until returns are up to date. This is always the first step.
Deal with the debt formally
Paying the debt in full resolves it. Where that is not possible, a formal arrangement does:
- An instalment payment arrangement spreads the debt over an agreed period. Once SARS approves it, the debt no longer counts against your compliance, provided you keep to the terms.
- A suspension of payment applies where you are genuinely disputing the assessment. An approved suspension also prevents the disputed amount counting against you.
- A compromise under section 200 permanently settles part of a debt that cannot realistically be paid in full.
Correct debt that should not be there
Sometimes the debt itself is wrong: an estimated assessment that was never corrected, penalties that should be remitted, or payments not allocated correctly. These should be challenged through the proper channel rather than paid or arranged.
Do Not Leave It Until the Tender Closes
Arrangements, suspensions and corrections all take time to be processed. A business that discovers its status is non-compliant a few days before a tender deadline may simply run out of time. Check your status well in advance of any bid, and treat a non-compliant flag as urgent.
Final Thoughts
Tax compliance status is where SARS debt meets your ability to do business. The rules are straightforward: file your returns, and either pay your debt or put a formal arrangement in place. The difficulty lies in doing it quickly and correctly when an opportunity depends on it.
A specialist can establish why your status is non-compliant, deal with SARS to resolve it, and keep it in order so that the next opportunity is not lost.
Disclaimer
This article is for general informational purposes only and does not constitute legal or tax advice. The application of tax law depends on the facts of each case. Professional advice should be obtained based on your individual circumstances.