VAT changes for South African businesses

With SARS increasing its scrutiny of export zero-ratings, South African VAT vendors are at greater risk of incorrect VAT treatment, penalties, and additional tax.

This is according to Tax Consulting SA’s Tax Attorney, Jenna le Roux, who said the legislative and administrative requirements relating to Value-Added Tax (VAT) are constantly developing.

In 2026 alone, the South African Revenue Service (SARS) issued several formal VAT amendments and Interpretation Notes to provide clarity and improve compliance.

However, Le Roux noted that one area that presents challenges for VAT vendors is when they may apply a zero-rate to VAT on their exports.

Ongoing VAT updates from SARS show the need to properly structure, declare, and document cross-border transactions upfront.

“Zero-rating does not mean that VAT is not levied,” Le Roux explained. “Rather, it means that VAT is levied at 0%.”

“Merely because goods leave South Africa does not mean that the supply automatically qualifies for zero-rating.”

This means businesses must ensure they comply with the requirements for zero-rating and retain the documents to prove that they were entitled to apply the zero rate.

One common misconception, Le Roux said, is that if goods leave South Africa, the supply is automatically zero-rated. In reality, the VAT treatment is determined by who is responsible for exporting the goods.

The VAT Act distinguishes between two types of exports: direct and indirect. The distinction depends on who is responsible for exporting the goods.

When the vendor arranges delivery to an export country, it is a direct export. Where the purchaser or their agent removes the goods from South Africa, it is an indirect export.

“This distinction matters because different VAT rules apply. In many indirect exports, the seller must charge VAT at the standard rate of 15%, and the qualifying purchaser may then apply for a refund,” Le Roux said.

The seller may apply the zero rate only in specific circumstances, and if all the requirements of the Export Regulations are met, she stressed.

“In essence, it is not enough to prove that the goods left South Africa. The vendor must also prove that such goods were exported in a manner that qualifies for zero-rating,” Le Roux said.

How businesses need to navigate South Africa’s VAT rules

Businesses tend to believe that goods qualify as exports only if they leave South Africa after being sold, but Le Roux said this is not always the case.

A South African business may, for example, already have stock stored in another country when it is sold, or may sell goods originating outside South Africa while they are being transported to a customer in another country.

SARS recognises that these supplies may still qualify for 0% VAT. However, the business must be able to prove where the goods were when they were sold and that they were delivered to the buyer.

“The important question is therefore not only whether the goods crossed the border, but whether the business can prove that the sale meets the requirements for zero-rating,” Le Roux said.

She explained that there is no single checklist that applies to every export. The required evidence depends on whether the export is direct or indirect, how the goods were transported, and who moved them.

“Exports by road, rail, sea, and air each require different supporting documents. The documents must do more than show that the goods left South Africa,” she said.

“Read together, they should establish what was sold, who arranged the transport, how the goods were removed, and who received them.”

If evidence is missing, she warned that SARS may disallow the zero-rating and force the vendor to account for VAT at the standard rate.

Le Roux also explained that repairs and replacements are treated differently for VAT purposes, even though they frequently arise from the same problem – a defective item.

“A repair involves fixing the original item. Where goods are temporarily brought into South Africa for repair and subsequently returned overseas, the repair service may qualify for VAT at the zero rate,” she said.

Parts incorporated into the repaired item may also qualify. By contrast, “replacement” describes the act of replacing something and may sound like a service.

However, for VAT purposes, the focus is on what is supplied. Where a new item is provided in place of the defective item, this is typically viewed as a separate supply of goods.

The replacement does not automatically inherit the VAT treatment of the original export. The vendor must establish that the replacement supply satisfies the zero-rating requirements.

To comply with the zero-rating requirements, vendors must also declare the supply in the correct field of the VAT201 return.

“Correctly completing your VAT return becomes important where a transaction includes both exported goods and separate services,” she said.

Le Roux said the full value cannot simply be declared as exported goods because it relates to a single cross-border transaction.

“Simply put, the VAT rate may be correct, but the return may still be completed incorrectly if the supply is declared in the wrong field,” she said.

“Correctly applying the zero rate does not cure an incorrect VAT201 classification.”