Any correspondence received from Sars can jolt you into action, but a letter of demand should be swiftly addressed.

Letters of demand are typically uploaded on your Sars eFiling profile, and, if your contact details have been updated, a notification might be sent via email or SMS.

“Unfortunately, many taxpayers only realise a letter has been issued when their bank account has been frozen or their salary garnished,” said Razael Manikus, the COO at Latita Africa.

“Once the wheels of tax collection have been set in motion, you are faced with serious consequences, but it can be resolved if you act immediately.”

What is a letter of demand?
Sars issues this formal notice if it believes you owe tax.
The possible reasons:
• IRP5s;
• Third-party data mismatches;
• Unclaimed deductions not reflected correctly, such as medical aid or retirement contributions;
• Undisclosed investment or rental income;
• Penalties on late submissions or underpayments from previous years;
• Reversed refunds following a SARS audit.
Sars often sends reminders before the official final letter of demand, but these reminders are mere courtesy communications and not legally required steps.

These come in the form of SMSes, emails or eFiling notifications, reminding you of outstanding balances.
It is important to note that these are not legal letters and do not trigger the 10-business-day enforcement countdown.

“The purpose is to give taxpayers a chance to settle the matter before formal debt collection begins,” said Manikus.

“A final letter of demand is the first legal step in Sars’ debt collection process. These are issued via eFiling, email or physical post to your registered address.”

Manikus explains that the 10-business-day period before Sars can take enforcement action, such as direct bank account debit, salary garnishing or property attachment, starts once a letter of demand has been issued.

What happens if you ignore a letter of demand?

Without further warning, Sars is authorised to deduct money from your income via garnishee orders to your employer or clients.

“It can also attach your bank funds, withhold tax clearances and refunds or apply for a court judgment that will blemish your credit record,” she said.

“In cases of repeat non-compliance, Sars can refer the matter to the National Prosecuting Authority.”

Assess your situation

Take the time to log into your Sars eFiling profile to check the date it issued the letter of demand. This is found under the ‘Correspondence’ tab.

The date of issue is the start of your 10-business-day response window.

“Review your statement of account to identify the source of your debt and the tax period involved,” said Manikus.

“If the amount is correct and you can pay, immediately do so. Ensure you use the payment reference number on the letter when paying.”

Pause the problem

If you cannot make a payment, apply for a suspension of payment to give you breathing space before filing disputes.

“Remember that this is a legal mechanism to pause Sars’ ability to collect, but it does not cancel the incurred debt,” she said.

“Suspension of payment applications can be done via eFiling or your tax representative. Attach a statement of financial hardship, your latest bank statements and a note explaining your intention to dispute.”

Make a plan
If you accept the debt but cannot pay in full, Sars may agree to a deferred payment plan with instalments.
You could also negotiate a compromise of tax debt, where Sars may reduce the debt if the full payment would cause you financial hardship.

Dispute, if needed

If you believe the assessment is wrong, lodge a formal notice of objection on eFiling. You will then have 30 business days from the original assessment.

“Clearly explain the reason for your objection and attach supporting documentation, such as invoices, proof of payments or bank statements as evidence,” said Manikus.

“Sars is not trying to trick you; they only want what is legally owed to them.”

She concluded by reminding taxpayers that it is crucial to follow the correct procedures and timelines when receiving a letter of demand.

“Do not assume the problem will resolve itself; instead, immediately speak to a qualified tax expert. Timing is crucial,” she said.