The South African Revenue Service (SARS) has released its VAT Modernisation Consultation Paper for public comment as it begins laying the “building blocks” for a modernised value-added tax (VAT) administration system.
The project forms part of a broader effort to transform tax processes, improve customer service and engagement, reduce the VAT gap and streamline VAT administration for businesses and traders.
The newly released consultation paper follows the VAT Modernisation Discussion Paper published in 2023, which SARS said helped shape the direction of the modernisation project.
SARS said it has incorporated feedback from the 2023 discussion document, alongside “best practices” identified through consultations with peer tax administrations and multilateral organisations.
SARS Proposes Digital VAT System With E-Invoicing
The consultation paper outlines a proposed digital VAT model that brings together e-invoicing, an interoperability framework and e-reporting.
The aim is to reposition VAT administration around digital processes and improve the way transactional information is shared between businesses and SARS.
SARS commissioner Dr Johnstone Makhubu said the proposed changes would mark a significant shift in how VAT is administered.
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“VAT modernisation is a major step in reshaping how VAT is administered in South Africa. It seeks to move us from a system that is still too dependent on manual processes and retrospective verification, to one where VAT compliance becomes part of the systems businesses already use every day.
“It is SARS’s belief that this modernisation of service will reduce the burden on compliant vendors, strengthen compliance and safeguard the revenue needed to fund South Africa’s development priorities.”
VAT Modernisation Could Reduce Business Compliance Burden
According to SARS, the proposed digital model is expected to provide benefits for both the revenue service and VAT vendors.
For SARS, access to reliable VAT transaction data is expected to improve visibility over transactions, provide more accurate data and strengthen risk-based compliance oversight.
The system is also intended to enhance SARS’s ability to detect and respond to fraud and help close the VAT compliance gap.
VAT vendors are expected to benefit from a simpler and more predictable compliance process, reduced administrative work and costs, clearer access to VAT information and faster processing.
SARS Seeks Public Input On VAT Modernisation
Makhubu said stakeholder input would be important before the proposed model is finalised.
“We are seeking practical, evidence-based input to ensure the final approach is practical, implementable and suited to South Africa’s economic realities. When done well and with high-quality stakeholder input, this work can significantly modernise VAT administration for the benefit of vendors, the economy and the fiscus. The long-term vision is a VAT system where tax compliance becomes a seamless part of ordinary business activity.
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“We are, however, clear that this must be developed in consultation with stakeholders so that the final model is secure, inclusive and aligned to South Africa’s needs.”
SARS has invited stakeholders and members of the public to review the consultation paper and submit their comments as the modernisation process moves forward.
