SARS scores major legal victory over gold sellers in South Africa

The Constitutional Court has ruled in favour of the South African Revenue Service (SARS) with regard to the zero-rating of gold.

The judgment, which was delivered on 23 June 2026, specifies that the zero-rating only applies to gold which has not undergone any manufacturing other than refining.

This means that second-hand gold, which has undergone prior manufacturing processes, is not eligible to be zero-rated in its sale to certain prescribed purchasers.

This includes gold, which is supplied to the South African Reserve Bank (SARB), the South African Mint Company, and other registered banks across the country.

The case originated from a dispute between SARS and Lueven Metals, a refining company which specialises in the buying and selling of second-hand gold.

Lueven had entered into an agreement with Absa to supply the bank with gold bars, which had been recycled from scrap jewellery and refined to a purity level of at least 99.5%.

Lueven treated the sale of these gold bars as zero-rated, allowing Absa to buy the gold with no VAT, whilst allowing Lueven to deduct the input tax paid to suppliers of its gold.

A 2021 audit conducted by SARS found that, because the gold had undergone prior manufacturing processes, it did not qualify for zero-rating under the VAT Act.

In response, Lueven initiated court proceedings against SARS in the Pretoria High Court, which would go on to dismiss Lueven’s application.

Lueven appealed the dismissal in the Supreme Court of Appeal, which dismissed the appeal on a preliminary point without ever pronouncing on the issue.

The matter was then brought before the Constitutional Court, South Africa’s highest court, with a hearing in November 2025 and the ruling delivered earlier this month.

“While refining does eradicate the recycled gold’s previous form, it does not alter the fact that such gold previously underwent a disqualifying manufacturing process,” the ruling said.

“Thus, on a purely textual reading, Lueven’s supply of recycled gold cannot benefit from zero-rating.”

Ruling provides clarity, for now

The Constitutional Court’s decision was welcomed by SARS as one which clears up confusion for the rest of South Africa’s precious metals industry.

SARS Commissioner Johnstone Makhubu said the clarity provided by the ruling would support compliant businesses and promote fair competition.

“Fair tax administration means that no taxpayer gains an unintended advantage at the expense of others,” Makhubu said.

“This outcome ensures that compliant businesses are not undercut by aggressive practices that erode fairness and distort competition.”

Makhubu said this aligned with SARS’ strategic intent to promote voluntary compliance and served to further protect South Africa’s tax base.

But while the Constitutional Court’s ruling has given SARS a major win, this legal victory may end up being short-lived.

The specific section of the VAT Act which dictates the zero-rating of gold, section 11(1)(f), has been placed under consideration to be scrapped by the National Treasury.

This was revealed during the Treasury’s Budget Review in February 2026, where it proposed that the section be repealed due to the practical difficulties associated with its compliance.

“It is complex to trace or isolate unprocessed, primary-source gold, and the refined product will likely have both components of primary and secondary gold that have gone through the process of manufacturing,” Treasury said.

“This results in suppliers not being able to comply with section 11(1)(f) of the VAT Act, and SARS must follow protracted audit procedures to confirm the validity of the application of the zero-rating.”

If this section of the VAT Act is repealed, then the domestic supply of gold bullion supplied to the SARB and other prescribed purchasers would be subject to the current VAT rate of 15%.

Legal experts and industry stakeholders have warned that this would increase administrative and compliance costs on gold mines, refineries and banks, making South Africa less globally competitive in the process.