Big changes are coming to South Africa’s VAT system as the South African Revenue Service (SARS) plans to roll out a full VAT e-invoicing framework, which is expected to be published later this year.
The changes form part of a broader VAT modernisation programme that would change how businesses report and manage VAT.
It is believed that these changes will increase transparency while significantly tightening SARS’ visibility over economic activity.
The South African Institute of Taxation (SAIT) expects the phased rollout of VAT e-invoicing to begin this year, with full operational capability targeted for 2028.
Speaking with Business Day, SAIT acting deputy CEO Keitumetse Sesana said the modernisation programme offers clear benefits but comes with heightened responsibility for vendors.
Under the proposed system, SARS would gain earlier and more accurate insight into business transactions, long before VAT returns are formally submitted.
Instead of relying largely on periodic self-assessments, the tax authority would increasingly be able to track VAT-related activity as it happens.
Sesana said the e-invoicing regime promises a more streamlined experience for businesses whose systems align with SARS’ requirements.
Digitally structured invoices and verified VAT numbers will enable accounting systems to send VAT information directly to SARS almost in real time.
For compliant businesses, this could mean fewer documentation requests, faster verification processes and improved turnaround times for VAT refunds.
Sesana added that compliance would increasingly become embedded in daily operations rather than treated as a once-off monthly or bi-monthly task.
However, the same systems would also give SARS unprecedented insight into vendors’ operations.
Real-time data from banks, accounting platforms and third-party systems would enable SARS to detect discrepancies early, often before a taxpayer becomes aware of an issue themselves.
In its VAT modernisation discussion paper, SARS noted that South Africa is lagging behind many other countries that have already introduced electronic VAT invoicing as a core compliance tool.
Will require amendments to both primary and secondary legislation
Globally, the dominant trend has been the digitisation of VAT source data, allowing tax authorities to receive transaction-level information directly from vendors’ systems to ensure compliance across the value chain.
According to SARS, VAT was introduced in South Africa in 1991, replacing the general sales tax, and remains a critical and predictable source of government revenue.
It operates on a self-assessment basis using an invoice-based credit input method, placing the responsibility on vendors to maintain proper accounting records and documentation.
Tax invoices play a central role in this system, forming a key part of the audit trail used to verify VAT liabilities and refunds.
While SARS has introduced technology across parts of the VAT value chain—including e-registration, eFiling and electronic payments—it has limited visibility into supply chains from a self-assessment perspective.
SARS said this lack of visibility exposes the fiscus to revenue leakages that are time-consuming to detect and often require frequent audits and verifications.
This places a heavy burden on businesses and delays VAT refunds.
To address these challenges, SARS plans to introduce a modern VAT return supported by the digital transmission of VAT data directly from vendors’ accounting systems.
SARS acknowledged that these changes will require amendments to both primary and secondary legislation.
Proposed changes include prescribing mandatory disclosure requirements for a modern VAT return, identifying categories of vendors or transaction types that must transmit VAT data digitally, and introducing penalties to discourage non-compliance.
As part of the consultation process, SARS has invited input from businesses, accounting software developers, technology providers, professional bodies and the public.
Stakeholders are being asked to comment on VAT data models, the digital transmission of VAT data, and the design of a modern VAT return with more detailed, disaggregated disclosure fields.