VAT Connect Issue 16 (August 2023)

Proposed amendments emanating from the Budget 2023

National Treasury and SARS published the following 2023 tax bills and the explanatory memoranda relating to them on 30 July 2023, which you can access on the SARS website by clicking on the links below.

Comments on the 2023 draft tax bills can be submitted in writing by close of business on 31 August 2023 to either the National Treasury’s tax policy depository at  [email protected] or to SARS at [email protected]. See the media statement for more information.

Recent amendments

Recently the following Acts containing amendments to the VAT Act were published. These documents can be accessed on the SARS website by clicking on the links below:

Explanatory Memoranda to the above Acts can be accessed by clicking on the links below:

See also the Rates and Monetary Amounts and Amendment of Revenue Laws Act 19 of 2022.

The above amendment Acts were all promulgated on 5 January 2023 as per Government Gazettes (GGs) 47862, 47827 and 47825 respectively. The amendments came into effect on 1 April 2023 unless otherwise stated.

A brief summary of some of the more important VAT amendments is provided below:

  • Cross border leases of foreign owned parts – In 2020 proviso (xiii) to the definition of “enterprise” was inserted to clarify that a non-resident lessor is not regarded as carrying on an enterprise in the Republic when foreign-owned ships, aircraft or rolling stock are leased for use in the Republic, subject to certain conditions being met. The scope of this proviso has now been extended to include the leasing of foreign-owned parts relating to such foreign-owned ships, aircraft or rolling stock if those parts are leased under a separate agreement. See the article “Non-resident lessors of ships, aircraft and rolling stock under a rental agreement” in VAT Connect Issue 12 for more information on the requirements.

  • Flash title sales – Before this amendment, non-resident entities that take ownership of goods in South Africa on a flash title basis and immediately on-sell such goods to other non-resident entities (customers) for export by the customers were regarded as carrying on an enterprise in South Africa. This approach was applied even if the non-resident had no intention to carry out any other commercial activity in South Africa. A new proviso (xiv) was therefore inserted into the definition of “enterprise” to exclude the activities of a “qualifying purchaser” (QP1) supplying goods to another “qualifying purchaser” under a “flash title” as defined in the Export Regulation published in Government Gazette (GG) 37580 on 2 May 2014 (the Export Regulation). QP1 must be a non-resident non-registered vendor, that acquires goods from a vendor and merely takes ownership of the goods in South Africa for a moment in time. The new dispensation is subject to QP1 complying with the documentary requirements prescribed in regulation 10 of the Export Regulation.

  • Repossessions and surrender – Section 20(8) previously dealt with documentation in connection with second-hand goods, and repossessions and surrender of goods previously supplied under an instalment credit agreement (ICA). Section 20(8) has now been amended to apply only to the supply of second-hand goods. Section 20(8A) has been introduced to specifically deal with the documentary requirements for repossessions or surrender of goods under section 8(10). See the article below “Documentary requirements for repossession and surrender of goods” for more information. Consequential amendments have also been made to section 16(2)(c) to include the documentation referred to under section 20(8A).

  • Temporary letting of dwellings by developers – On 1 April 2022, new provisions in the form of sections 9(13), 10(29), 16(3)(o) and 18D were introduced to deal with dwelling units that have been developed for sale by a developer, and such dwellings are temporarily let for exempt residential use whilst the developer continues to pursue a taxable intention of selling the units. Further technical amendments have been made to provide clarity. The time of supply under section 9(13) is now triggered in the tax period in which the agreement for letting and hiring of the dwelling comes into effect or when the dwelling is occupied, whichever occurs first. Technical corrections were also made to section 16(2)(f) and section 16(3)(o). These amendments have retrospective effect, applicable from 1 April 2022. For further information on this topic see Binding General Ruling (BGR) 64.

  • Pooling arrangements – A new subsection (3) was inserted into section 52 to allow for pooling arrangements in industries other than agriculture and property rental. This new provision is intended to deal with the VAT treatment of pooling arrangements established as a manner of complying with the provisions of legislation, regulations or rules of a professional body. The provision only applies to persons that are subject to such legislation, regulations or rules of such professional body. There are also certain conditions that apply, for example, joint and several liability will be applicable. This provision can be applied, for example, to medical pools. In such a case, the medical pool may be deemed to be separate from its members and may be registered as a vendor. This allows the medical pool to account for the VAT of the members as opposed to registering each individual medical practitioner governed by Health Professions Council of South Africa (HPCSA) that forms part of the pool.

  • Registration of foreign entities – Section 23(2A) is a new provision aimed at alleviating the administrative difficulty for foreign entities required to register for VAT in South Africa. If one or more foreign entities forming part of the same “group of companies” as defined under section 1(1) of the Income Tax Act are required to register for VAT, section 23(2A) allows for a single branch VAT registration for all those separate entities. This firstly requires that one of the entities in the group must already be conducting an enterprise in South Africa and be registered as a vendor (main registered vendor). The main registered vendor may then register a separate branch or division for all the foreign entities. The primary purpose of the separate registration is to ensure that a distinction can be drawn between the supplies made by the main registered vendor and the other foreign entities. The main vendor must submit a VAT return to account for its own VAT and a separate VAT return must be submitted for the branch or division to account for the VAT of all the other entities. The normal VAT rules apply to supplies made between entities in the same group and if those supplies form part of their enterprise activities in the Republic, the VAT on such supplies must be accounted for in the VAT return submitted for the branch or division. There are certain conditions that apply, for instance, the branch will be treated as an enterprise separate from the main registered vendor and the Commissioner may cancel the branch registration under specified circumstances. Any of the non-resident group companies may, however, elect to register independently as a vendor in South Africa, and not form part of the branch registration under the new dispensation.

  • Swaziland name change – Textual amendments have been made to section 13(1)(iii), section 13(2)(b), Schedule 1 to the VAT Act and Item 412 to reflect the name change of Swaziland to eSwatini.

  • Registration of foreign electronic service providers – A new proviso was inserted into section 23(1A) with effect from 5 January 2023 to the provide that a foreign electronic services provider is not required to register as a vendor if the total value of taxable supplies of R1 million in any consecutive 12-month period has been exceeded solely as a consequence of abnormal circumstances of a temporary nature. The amendment is aimed at achieving parity with the concession granted to domestic vendors.

Documentary requirements for repossession and surrender of goods

As mentioned in the article “Recent amendments” above, section 20(8A) was introduced to deal specifically with documentary requirements in connection with the repossession and surrender of goods. The amendment was necessary to address certain situations which caused vendors to experience difficulties in obtaining the required documents, and information for claiming notional input tax when there is a repossession or surrender of goods previously supplied under an ICA.

When goods, previously supplied under an ICA, are repossessed or surrendered, the debtor is deemed to make a supply of such goods to the creditor. If those goods were not used in the enterprise of the debtor before the repossession or surrender, or the debtor is not a vendor, the creditor is entitled to a notional input tax deduction. However, the creditor must obtain certain prescribed documentation before that deduction may be made. Before 5 January 2023, section 20(8) of the VAT Act prescribed the documentation the creditor had to obtain. This included, amongst others, the signed VAT 264 declaration if the debtor was not a vendor, and proof of payment. Due to the hostile nature of repossession and surrender, the debtor is often reluctant to cooperate and there was difficulty in obtaining a signed VAT 264 declaration from the debtor. In addition, because no actual payment occurred, no proof of payment existed.

Section 20(8A) now provides that if a debtor makes a deemed supply to the creditor of goods repossessed or surrendered (not being a taxable supply), the creditor must obtain the following information in order to deduct notional input tax:

  • The date on which the goods were repossessed or surrendered
  • The name of the supplier
  • A description of the goods
  • The consideration for the supply
  • Further particulars in the form and manner as the Commissioner may prescribe

The Commissioner has also published BGR 63, which sets out the further particulars prescribed by the Commissioner under section 20(8A)(c). See paragraph 4 of BGR 63 for the list of further particulars required.

The creditor is therefore no longer required to obtain the VAT 264 declaration in the case of goods repossessed or a surrender of goods. However, the VAT 264 declaration is still required for a supply of second-hand goods and changes have been made to the VAT 264 declaration to facilitate easier and simpler completion. See the new VAT264: Declaration for the supply of second-hand goods.

New dispute resolution rules

The new dispute resolution rules (the new rules), effective from 10 March 2023 were promulgated in Notice 3146 (GG 48188), which also repealed the previous dispute resolution rules.

Essentially, the new rules govern the following:

  • The procedures to lodge an objection and appeal against an assessment or decision that is subject to objection and appeal under section 104(2) of the TA Act.
  • The dispute resolution procedures under which SARS and the person aggrieved by an assessment or decision may resolve a dispute in accordance with Part C of the rules.
  • The conduct and hearing of an appeal before a tax board or tax court.

Part G of the new rules contains transitional rules which provides that, disputes not finalised at the commencement date of the new rules, that is, 10 March 2023, will generally be dealt with and finalised under the new rules.

The most important change is the increase in the number of days in which a taxpayer may lodge an objection, which has increased from 30 business days to 80 business days.

Below is a summary of the significant changes to the applicable time periods under the new rules:


Time Period

From / After



Objection by taxpayer

80 business days

Date of delivery of SARS notice or SARS reasons

21 business days unless there are exceptional circumstances

7(1) to (3)

(See also section 104(4) of the TA Act)

Post ADR meeting reports by facilitator

5 business days

Date of conclusion of an ADR meeting

By agreement under rule 4


Registrar to deliver copies to tax court

20 business days

Prior to date of set down of hearing

By agreement under rule 4


Registrar to deliver judgment to the parties

10 business days

After receipt of the judgment from the tax court

By agreement under rule 4


SARS must issue assessment

45 business days

After receipt of a copy of the tax court’s decision by the registrar and no appeal is lodged by SARS

By agreement under rule 4


These new rules were included in the updated Dispute Resolution Guide: Guide on the Rules Promulgated in terms of Section 103 of the Tax Administration Act, 2011 which was published on 23 May 2023.

SARS also issued a new Guide to Submit a Dispute via eFiling on 24 April 2023 to assist taxpayers with the submission of various requests on eFiling such as, Request for Remission, Notice of Objection, Notice of Appeal, Request for Reasons, Request for Late Submission (Condonation) and the Suspension of Payment form when disputing the interest and penalties levied, assessments raised and/or administrative penalties levied. System enhancements that apply to VAT and other taxes mentioned in the guide were made with effect from 24 April 2023 to improve the general efficiency and effectiveness in resolving tax disputes.

Notice 3135 (GG 48187) and Notice 3136 (GG 48187) that provide respectively for various matters regarding the prescribed manner for delivery of documents, notices or requests relating to the dispute process, or intention to institute legal proceedings under section 11(4) of the TA Act or any process by which legal proceedings are instituted against SARS, were also published on 10 March 2023.

Changes to the VAT registration process

During the month of April 2023, SARS detected an abnormal increase in the number of VAT registration applications for individuals. Many of these VAT registration applications were submitted with the intent to defraud SARS by claiming fraudulent VAT refunds. Consequently, SARS conducted an urgent review of the VAT registration process and as a result of the review outcomes, the following changes were implemented with immediate effect:

  • All new VAT registration applications for individuals will be subjected to a more stringent registration process. This could include the requirement that the applicant present him or herself, in person, at a SARS branch, to review and validate the information that was disclosed on the VAT registration application.

  • The applicant must complete the VAT registration application on the SARS eFiling platform.

  • A “Tax Subscription Review Notice” will be issued informing the applicant that the VAT registration application is under review and request supporting documents to be submitted. The applicant may submit the supporting documents via the SARS eFiling platform, the SARS Online Query System, or at a SARS branch.

  • The applicant must make an appointment via the SARS e-Booking system, choosing the “VAT Registration Accreditation” option, if that applicant is required to or wishes to visit a SARS branch for an in-person interview. All supporting documents must be available on the day of the appointment.

  • If all the required supporting documents are not submitted within 21 business days from the date that SARS requested such documents, or if the applicant does not book an appointment within 21 business days from the date that SARS informed the applicant, the VAT registration application will be rejected. A Notice of Rejection will be issued to the applicant.

While SARS prefers in-person engagements to be with the representative taxpayer, tax practitioners with a Power of Attorney are allowed to represent their clients after the initial legal entity and a tax type application is complete. During the appointment, the tax practitioner must be able to answer all questions relating to the applicant’s enterprise and operations, failing which the VAT registration application will be rejected. This is an existing practice that has not been changed by the VAT registration procedures that were announced on 11 May 2023.

A VAT registration number will only be issued once the VAT registration application is successfully processed and SARS is satisfied that the registration application is valid.

For more details and background to this matter, see the media statement SARS detects unusually high number of suspicious VAT registrations.

Commercial accommodation arranged via Apps and platforms

In recent times it has become commonplace for property owners (hosts) to let their holiday homes or accommodation in their private homes as short-term accommodation to customers (guests) through the use of online accommodation reservation applications (Apps), which are available on various internet websites (platforms).

As there is some uncertainty and non-compliance regarding the various tax laws that apply regarding supplies of commercial accommodation, SARS issued a media statement on 11 March 2021 to highlight various concerns. (See the media statement All forms of rental income must be declared to SARS.) This article aims to provide further detail on the VAT laws that apply in support of what has been stated in the media statement to assist suppliers to become tax compliant. It also highlights transactions arranged via platforms as the media statement is written in more general terms and did not address this aspect.

How platforms and Apps generally work

There may be different ways as to how the arrangements work, but generally the App and the platform are used as a mechanism for the host to list (advertise) the availability of the accommodation on the internet to a wide audience of potential guests. The duties and responsibilities of the host and the platform entity are typically formalised by way of what is commonly referred to as a “hosting agreement”. The platform entity will do most of the administration, including the billing of guests and the collection of any charges (including VAT, if applicable) for the accommodation, cleaning fees, security deposits etc on behalf of the host. The host is responsible for giving the guest access to the accommodation and making sure that the accommodation meets the required quality and cleanliness standards as advertised. Potential guests that subscribe to the App or access the platform will search for and book the accommodation of their choice online. The guest pays the platform entity for the accommodation as well as a separate service fee for arranging the accommodation. The platform entity will then process the payment and the necessary paperwork. Thereafter, payment is made to the host for the accommodation and any other additional charges due to the host. The administration is then finalised and a disbursement statement is issued, indicating any charges by the platform entity to the host for arranging or advertising the supply of accommodation.

General VAT principles

VAT is a tax on any goods and services supplied for consumption in South Africa. Such supplies are usually subject to VAT at the standard rate (currently 15%), subject to certain exemptions and exceptions. The liability of a person to register and charge VAT is based on the concept of an “enterprise”. Some of the requirements of an enterprise (amongst others) are that the person must make taxable supplies on a continuous or regular basis in South Africa and must charge a consideration for those supplies. If the value of those taxable supplies exceeds, or is likely to exceed, the VAT registration threshold in any 12-month consecutive period, then the supplier is required to register as a VAT vendor. That vendor must then charge and collect VAT on any taxable supplies made and remit the VAT to SARS. See the VAT 404 – Guide for Vendors for further information on the general VAT principles. 

In so far as platform entities are concerned, it should be clear that their activities are merely the arranging or advertising of the accommodation and not the supply of the accommodation itself. This will apply whether or not platforms do the billing for the supply of the accommodation and collecting the VAT-inclusive charges for that supply on behalf of the host. Non-resident platform entities may be required to register for VAT in South Africa for their arranging or advertising services on the basis that they supply “electronic services” to South African customers, but that is a separate matter and is not the focus of this article. (See the FAQs on Supplies of Electronic Services for more details in this regard, in particular, Question 42.) The normal VAT rules as explained in this article will apply to Platforms that have a local presence in South Africa.

Commercial accommodation

In principle, the supply of commercial accommodation is a taxable supply. It follows that the supplier of commercial accommodation in South Africa (the host) may be required to register for VAT if the value of those taxable supplies exceeds the VAT registration threshold. The term “commercial accommodation” is defined in the VAT Act, but in layperson’s terms, it is essentially short-term accommodation supplied together with “domestic goods and services” (also a defined term), which are either included in the price for the accommodation, or supplied for a separate consideration for consumption at the place where the accommodation is supplied. Examples of commercial accommodation include accommodation supplied at hotels, guest houses, boarding establishments, camping sites etc. Examples of domestic goods and services include meals, beverages, room service, cleaning, laundry, fees for using sporting facilities, telephone, electricity, internet etc. There are some special rules which apply as regards the VAT registration threshold and certain valuation rules if the commercial accommodation is supplied for an unbroken period of more than 28 days. These will be explained briefly below.

The supply of a “dwelling” (also a defined term) must be distinguished from the supply of “commercial accommodation” as those terms are mutually exclusive. This distinction is important because the supply of a dwelling is exempt, whereas a supply of commercial accommodation is taxable. The supply of a “dwelling” is the supply of the exclusive right of use of a specified property under a lease or rental agreement for a fairly long period of time as a place of abode for the lessee(s).

For further information on the concepts of “enterprise”, “taxable supplies”, “commercial accommodation” and “dwelling”, see the VAT 411 – Guide for Entertainment, Accommodation and Catering.

VAT registration

The normal rule is that a person is liable to register for VAT and to charge VAT on any taxable supplies if the value of those supplies exceeds R1 million in any consecutive period of 12 months. Alternatively, a person may register for VAT voluntarily if the value of taxable supplies in any consecutive period of 12 months has exceeded R50 000. However, there is a special rule for persons that make supplies of commercial accommodation. The rule is that the minimum threshold of taxable supplies for voluntary registration of R120 000 (and not R50 000) must be exceeded before that person may qualify as an enterprise and register as a vendor. It follows, for example, that if a person supplies commercial accommodation over a period of 12 months and the value of those supplies is R80 000, that person does not conduct an “enterprise” and will not be allowed to register. In that case, no VAT should be charged on the accommodation supplied. 

Accounting for VAT by the host

The host (being a vendor) and not the platform entity is liable to account to SARS for the VAT that is due on the supply of commercial accommodation in South Africa. This applies whether the commercial accommodation is supplied through the use of an App on a platform or not. The host cannot rely on the platform entity to account for the VAT to SARS, but the platform may collect the VAT on behalf of the host as part of the price charged for the commercial accommodation. Importantly, VAT (output tax) must be accounted for on the full price of the accommodation, including any other domestic goods or services supplied together with the accommodation by the host. It is not correct to work with the net balance received by the host as reflected on the disbursement statement if any charges due to the platform entity have been set-off against the full VAT-inclusive price of goods or services supplied by the host. However, if the platform entity is registered for VAT in South Africa (whether as a non-resident supplier of “electronic services” or as a local resident platform), the VAT on any VAT-inclusive price charged by the platform to the host for arranging or advertising the commercial accommodation may be deducted as input tax. The platform entity must issue a separate tax invoice to the host in that regard if the disbursement statement does not meet the requirements of a tax invoice. 

If the commercial accommodation (including any domestic goods and services) is supplied for an unbroken period of more than 28 days at a VAT-inclusive charge, then a special value of supply rule is applicable. In such a case, the consideration in money is deemed to be 60% of such all-inclusive charge. Hosts that make their supplies of commercial accommodation through the use of Apps and platforms should inform the platform entities accordingly so that the correct amount of VAT can be collected. VAT must be charged at the standard rate on the full price of any goods or services supplied to guests that do not meet the definition of “domestic goods and services”. (For example, gift shop sales.)

Publication of VAT rulings 

Under the TA Act, SARS is required to publish VAT class rulings and VAT private rulings (rulings) as well as decisions under section 72 for information purposes. However, to preserve the secrecy of taxpayer information, the ruling or decision must be published in a form that does not reveal the identity of the applicant or other parties to a transaction (confidential information). Examples of confidential information includes the name, address, and other identifying details of the applicant, as well as any person identified or mentioned in the ruling, and any other information that would constitute unwarranted invasion of personal privacy. 

To this end, SARS sent out various templates to be completed by applicants applying for rulings via stakeholder channels, that will assist in the publication of the rulings or decisions in sanitised form. Templates for decisions under section 72 will also be sent via stakeholder channels in the near future.

In certain limited circumstances, due to unique facts relating to the parties to the transaction or to the transaction itself, it may not be possible to publish the ruling or decision under section 72 without revealing confidential information. In such a case, a summary of the issues raised in the application and the ruling or decision under section 72 that was given, may be published. In addition, a ruling or decision under section 72 that has already been published on a similar transaction, might not be published due to duplication and taxpayers will be informed accordingly.

SARS intends publishing all rulings and decisions under the revised section 72 (see VAT Connect 10 and VAT Connect 12 for more details), except to the extent that these decisions have expired, or are impacted by subsequent changes in the law. Rulings issued from 1 April 2023 will be published in due course, subject to the exceptions stated above.

For more information on the publication of rulings and decision under section 72, see the VAT Rulings Process Reference Guide and the VAT Section 72 Decisions Process Reference Guide. These guides will be updated to reflect changes to the VAT rulings process and will be communicated in a future issue of the VAT Connect or published in a media statement.

Domestic Reverse Charge Regulations

The Domestic Reverse Charge Regulations (DRC Regulations) came into effect in July 2022 and information on this topic is available on the VAT Domestic Reverse Charge webpage the Frequently Asked Questions (FAQs) as well as the article “Domestic Reverse Charge Regulations” in VAT Connect 14.

Suppliers and recipients that are existing registered VAT vendors and that are currently involved in buying and selling valuable metal must re-validate their registration status with SARS. See the to VAT Domestic Reverse Charge webpage under “What must be done?” for further details on the validation process.

It is noted that some vendors do not declare DRC supplies and purchases in the correct fields on the VAT 201 return. Supplies subject to the DRC must be accounted for by the supplier, at the VAT-exclusive amount of the valuable metal in Field 3 of the VAT201 return. The recipient of valuable metal must account for the VAT on the acquisition thereof in Field 12 of the VAT 201 return. The recipient will then also be entitled to an input tax deduction which must be claimed by reflecting the VAT so declared in Field 18 of the VAT 201 return. The supplier of valuable metal must not show the VAT component on DRC supplies it made on the VAT 201 return for relevant the tax period. It has been noticed that some suppliers have erroneously declared output tax on their DRC supplies in Field 18 of the VAT 201 return. Field 18 relates to input tax deductions, so by making this mistake, the supplier would have overstated their deductions and understated their VAT liability for the tax period. As a result, that shortfall will be subject to penalty and interest. See Questions 19 and 23 to 25 of the FAQs for further information on declaring DRC-related transactions on the VAT 201 return.

As mentioned in VAT Connect Issue 14, a dedicated mailbox was created to specifically deal with questions on the DRC Regulations. This mailbox will be closed with effect from 31 August 2023 as enquiries in this regard have reduced substantially.

Debt collection

The Draft Interpretation Note – The value-added tax treatment of debt collection, which was published for public comment on 9 September 2022, is currently still in the process of being finalised. Due to the number of public comments received this draft interpretation note will once again be issued for public comment.


Since the last issue of VAT Connect, the following documents impacting on VAT have been published on the SARS website (Refer to the “Legal Counsel” page).

Binding General Rulings (BGRs)




VAT Connect is an information guide and not an “official publication” as defined in section 1 of the TA Act and accordingly does not create a practice generally prevailing under section 5 of that Act. It is also not a binding general ruling (BGR) under section 89 of Chapter 7 of the TA Act nor a ruling under section 41B of the VAT Act. For general enquiries regarding VAT call the SARS Contact Centre on 0800 00 7277. Should there be any aspects relating to VAT on which a specific VAT ruling is required, you may apply for a ruling by completing form VAT301 and sending it together with all the necessary information to SARS by facsimile on +27 86 540 9390 or by e-mail to [email protected]. Refer also to the Quick Reference Guide on VAT Ruling Application Procedure for more details on how to apply for a ruling.

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