Fuel tax warning for South Africa

The Constitutional Court has sent a clear warning to taxpayers that fuel levy, RAF levy and excise refunds for cross-border fuel exports are a privilege, not a right, and will be denied unless there is strict compliance.

On 16 January 2026, the Constitutional Court delivered an important judgment for the fuel industry in the Tholo Energy Services v Commissioner for the South African Revenue Service (SARS) case.

Shepstone & Wylie Attorneys partner Freek van Rooyen explained that this decision addresses the removal of fuel levy goods (fuel) to Lesotho, a BLNE (Botswana, Lesotho, Namibia, and Eswatini) member state.

“Although the decision confirms that fuel levy and Road Accident Fund (RAF) levy refunds are subject to strict statutory compliance, it also applies to the refund of excise duty and levies in respect of exports to non-BLNE countries,” he said.

“The decision therefore provides clarity on several long-debated issues affecting cross-border fuel supplies.”

This case involved Tholo Energy Services, a licensed fuel distributor, which supplied diesel to customers in Lesotho in 2016.

“The fuel was collected from inland depots in Bloemfontein, Tzaneen, and Alrode, rather than from a licensed manufacturing warehouse (VM),” Van Rooyen said.

“After paying fuel and RAF levies under South Africa’s duty-at-source system, Tholo claimed refunds of approximately R4.25 million, being in respect of fuel and RAF levies, as the fuel was removed to a BLNE country.”

SARS disallowed the claims, and the matter progressed through the High Court and the Supreme Court of Appeal before reaching the Constitutional Court, which ultimately dismissed Tholo’s appeal.

As previously decided, the court confirmed that an appeal under section 47(9)(e) of the Customs and Excise Act is a wide appeal, Van Rooyen explained.

“This means that the court considers the matter afresh, and SARS is entitled to rely on additional legal and/or factual grounds to defend its original decision – provided those grounds relate to the same determination,” he said.

“For industry participants, this reinforces that refund appeals are not limited to procedural defects. Claimants must be able to prove compliance with all applicable statutory requirements.”

However, Van Rooyen said a claimant can also rely on new facts and/or arguments to bolster its case for refunds on appeal to the High Court.

The judgment sends a clear message

Another relevant finding in this case, Van Rooyen said, was that fuel intended for export or removal to a BLNE country must be obtained directly from stocks at a licensed VM.

“Fuel collected from unlicensed depots does not qualify, even if those depots are operated by a company that holds a VM licence elsewhere,” he said.

“This confirms a strict interpretation of Schedule 6, item 671.11, which will also apply to the Schedule 6 rebate provisions addressing refunds for set off of duties and levies in respect of exports by a licensed VM.”

The court also ruled that diesel exports require a valid export permit from the International Trade Administration Commission of South Africa, Van Rooyen said. This rule applies even where fuel is supplied to BLNS countries such as Lesotho.

“Claims that permits were unnecessary based on industry practice were rejected,” he said. The court further upheld the taxman’s findings that –

• Fuel was transported by an affiliated entity that was not licensed (in other words, as a remover of goods in bond) to do so
• The refund claimant did not pay the fuel levies itself
• Common ownership between entities does not satisfy statutory licensing or payment requirements

Van Rooyen stressed that the judgment sends a clear message – the fuel and RAF levy, as well as excise refunds, are a privilege, not a right.

“Licensed distributors and VM licensees exporting fuel must ensure strict compliance with the rebate item requirements, including the sourcing, transportation, and documentation requirements. If not, SARS will disallow such refunds,” he said.