Proposed Changes Regarding VAT Modernisation in South Africa – Discussion paper

The discussion paper by SARS aims to explain the modernisation of the South African VAT administrative framework. This modernisation will affect all businesses registered or planning to register for VAT. The goal is to adopt real-time or near real-time transmission of VAT data from vendors to the tax authority.

SARS invites all stakeholders to submit contributions and comments as part of the consultative process.

Background

VAT is a self-assessment tax with an emphasis on maintaining proper accounting records. Since the introduction of VAT in South Africa in 1991, despite being a major revenue contributor, VAT’s modernisation efforts have been slow. The Minister of Finance announced a review of the VAT administrative framework in the 2023 Budget.

What is the aim of VAT modernisation?

SARS aims to build a modern VAT system with built-in integrity to provide clarity for taxpayers, make compliance easier, and detect non-compliance.

The future state aims to receive digitally transmitted VAT data. The modernisation will be a staged approach, including developing VAT data models, integrating vendor systems with SARS, and testing implementations. There is a potential need for a modern VAT return that aligns with current accounting principles and provides more detailed data.

The modernisation will impact businesses registered or required to be registered for VAT (vendors). In line with international trends in making the VAT system agile and easy to administer (both for the tax authority and vendors), there is a growing acceptance for the adoption and implementation of real-time or close to real-time transmission of VAT data from vendors to the tax authority, and the reporting of VAT data using the modern VAT return.

International Benchmarking

Many countries have started their VAT modernisation. Different countries have different models and stages of implementation. Electronic invoicing is a common theme to ensure VAT data transmission and compliance. Costs for compliance are usually borne by the vendors. Research indicates that electronic invoicing software solutions are used in various forms across countries.

Legislative Amendments

The modernisation will require changes to current legislation, including defining mandatory requirements for modern VAT returns, identifying categories of vendors for digital transmission, and introducing penalties for non-compliance.

Feedback Request

Stakeholders are invited to submit contributions and comments on the VAT data models, digital transmission of VAT data, and formulating a modern VAT return.

Email your comments to technical@myciba.org by 20 October 2023, and we will combine inputs into a submission.

Read the Discussion Paper on Value-Added Tax Modernisation here.