VAT Connect Issue 17 (December 2023)

Legislative amendments

The public was alerted to the publication of the 2023 draft tax bills on 30 July 2023 in the VAT Connect Issue 16. National Treasury has thereafter published a draft response document to these proposed amendments, which is generally issued after the written public comments addressed to the Standing Committee on Finance (SCoF) in Parliament on policy aspects of draft legislation are considered. The draft response document is accessible at Response Documents.

The Minister of Finance has since introduced the 2023 tax bills in the National Assembly on 1 November 2023. The 2023 tax bills and accompanying explanatory memoranda can be accessed by clicking on the links below:

After the legislative process is completed, the above bills will be passed as law and promulgated as Amendment Acts. Traditionally that process is normally completed early in January.

Submissions for proposed amendments 2024

National Treasury invited taxpayers, tax practitioners and members of the public to submit written tax proposals of a technical nature to be considered for possible inclusion in Annexure C of the 2024 Budget Review. The technical tax proposals requested in the invitation were limited to unintended anomalies, revenue leakages, loopholes and technical matters applicable to the current tax legislation that require correction. More substantive tax policy proposals and rate changes are dealt with through a different process.

The public had until 24 November 2023 to submit technical tax proposals in writing by email to National Treasury and SARS.

In order to clarify any issues raised in the submissions and to further assist in the prioritisation of the issues raised and to obtain further information, virtual public workshops will be held with stakeholders on 7 and 8 December 2023. A meeting request will be sent closer to the proposed dates for the workshops.

Further details and guidance on the criteria and format of the written technical tax proposals can be found in the Media Statement inviting such submissions on the National Treasury website.

Overpayment of VAT on the importation of goods

There appears to be some uncertainty regarding the amount of input tax that can be deducted by a vendor (principal or importer) when a clearing agent makes an error in calculating the customs duty and VAT on an importation of goods which results in an overpayment of customs duty and VAT. In particular, this situation may arise when the clearing agent does not obtain payment of the duties and VAT upfront from their client (principal or importer) but recovers that amount later after having used their deferment arrangement to process the payment. Due to the volume of transactions processed by clearing agents on behalf of multiple customers, it sometimes happens that an incorrect amount of VAT is calculated, declared, and paid on the importation of goods. Examples include the application of an incorrect currency or exchange rate, or principals that give duplicate clearing instructions.

Applicable legal principles

VAT is levied on the importation of goods by any person into South Africa, subject to certain exceptions and exemptions set out in Schedule 1 to the VAT Act. The value on which VAT is payable on importation is based on the value determined under the Customs and Excise Act, 1964 (see section 13(2) of the VAT Act). The principal or importer, and not the clearing agent, is the person that is deemed to import the goods for VAT purposes and is also the person that is liable for the payment of the VAT on importation [see sections 7(2) and 54(2A)(a)]. The clearing agent merely makes the customs clearance declaration (such as a bill of entry) and facilitates the payment of the import VAT to SARS on behalf of the principal/importer in terms of a contract for services between the parties.

It follows that, when a vendor has acquired the imported goods for making taxable supplies, the vendor (principal or importer) is the only person that may deduct the VAT paid on the importation of the goods concerned, subject to the relevant documentary evidence. There is no provision in the VAT Act, which allows the clearing agent to deduct the input tax in relation to any VAT paid on goods imported into South Africa on behalf of their client.

Customs Refunds Policy

There are specific limited circumstances in which SARS will refund the VAT overpaid on the importation of goods to the person who had paid the VAT. Customs will only process a Voucher of Correction (VOC) and authorise a refund of VAT on overpayments by means of a General Application of Refund (CR 1) in any of the following four circumstances set out in paragraph 2.2.7 of the Customs Refunds and Drawbacks Policy (Customs Refunds Policy):

  1. If the importer is not a registered VAT vendor.
  2. If there is a duplicate clearance. This is when more than one customs clearance declaration has been processed in respect of the importation of the same goods.
  3. If the clearing agent has invoiced and processed the import documentation in the incorrect importer’s name.(This does not include a situation in which the clearing agent has invoiced and processed the import documentation incorrectly in the name of the correct importer.)
  4. If there is a substitution of a customs clearance declaration. This is when the goods have been cleared under the incorrect Customs Procedure Code (CPC), resulting in the original customs clearance declaration being substituted by a new customs clearance declaration reflecting the correct CPC and VAT is paid a second time.

In instances in which SARS does not allow a VOC to be processed for the VAT overpaid, the effect is that the clearing agent could temporarily be out of pocket for the VAT that was paid to SARS on behalf of its client (principal or importer). In essence, the issue here is really one that relates to a dispute arising from the contractual relationship between the clearing agent and the principal or importer.  

Input tax deduction on the overpayment of VAT

If none of the four requirements in the Customs Refunds Policy apply, and the VAT has been overpaid on the importation of goods, the principal or importer (being a vendor), must deduct the VAT (including any overpayment) on a VAT 201 return for the tax period concerned. The principal or importer may only deduct the VAT paid on importation during the tax period when the goods are released under the Customs Act [see sections 16(3)(a)(iii) and 16(3)(b)(ii)], and subject to the following documentation being held (see section 16(2)(d)):

  • An “EDI Customs Status 1 Release Message”.
  • A valid bill of entry (BOE) or other document prescribed by the Customs and Excise Act (for example, form SAD 500 and/or any additional SAD document that might be required).
  • The receipt number for the payment of such tax, that is the receipt issued on eFiling.

In the case of goods that are imported by an agent acting on behalf of the principal, and the customs clearance declaration is held by the agent, the agent must furnish the principal with a statement within 21 days of the end of the calendar month during which the goods were imported, containing the following particulars:

  • The full and proper description of the goods.
  • The quantity or volume of the goods.
  • The value of the goods.
  • The amount of tax paid and the receipt relating to the payment of such tax, that is, the receipt number issued on eFiling for such payment.

The principal must be in possession of the statement at the time the VAT return containing the deduction is submitted to SARS. The agent must also maintain sufficient records to enable the name, the address and VAT registration number of the vendor to be ascertained [see sections 16(2)(dA) and 54(3)(b)].


In the case in which there has been an overpayment of VAT, and SARS does not allow a refund of the VAT under the Customs Refund Policy, the principal or importer (being a vendor) is entitled to a deduction of the VAT based on the full amount reflected on the customs clearance declaration, subject to the normal requirements for deducting “input tax”. The reimbursement of any overpayments of VAT made by the agent on behalf of the principal, must be addressed between the agent and the principal/importer in terms of their contractual agreements. SARS cannot intervene if the principal or importer refuses to reimburse the clearing agent. Clearing agents should also be careful not to make the mistake of deducting that VAT on their own VAT 201 return, as this is not allowed as a deduction.

See also Binding General Ruling 66 published on 27 November 2023.

Securities lending arrangements 

A “securities lending arrangement” refers to an arrangement under which a person (the lender) lends any security or instrument to another person (the borrower) who undertakes to return a security or an instrument of the same kind, and of the same quality, to the lender (whether or not such arrangement qualifies as a “lending arrangement” as defined in the Securities Transfer Tax Act 25 of 2007.

Practice Note 5/1999 “Tax Implications for Lending Arrangements in respect of Marketable Securities” (PN 5/1999), was issued more than 20 years ago, dealing with the implications of lending arrangements for all the various taxes that were applicable at the time (including VAT). In paragraph 5 of PN 5/1999, when dealing with VAT, it was stated that –

a fee or commission charged by a vendor for making scrip available to another person, is, in view of the proviso to section 2(1), not consideration for a financial service and is, accordingly, subject to VAT.

In light of recent court decisions concerning the proviso to section 2(1) as well as further detailed analysis of securities lending arrangements and consultation with stakeholders, it was decided that this statement is not supported in law. As a result, the VAT content in paragraph 5 of PN 5/1999 was withdrawn with effect from 1 April 2023. The withdrawal was effected by way of publishing Binding General Ruling 62 “Value-added Tax Implications of Securities Lending Arrangements” (BGR 62) on 12 December 2022 to clarify the VAT policy position.

In brief, BGR 62 concluded that the scrip-lending fee charged under a securities lending arrangement constitutes consideration in respect of an exempt supply, and is not subject to VAT. This is on the basis that the “scrip-lending fee” does not relate to any other service forming part of the activity of the securities lending arrangement, except for granting the use of the security or instrument during the period. The transfer of ownership of the security or instrument is not an independently cognisable supply of goods in the form of the security or the instrument. The same applies to the return of the security or instrument at the end of the lending period.

During the consultation process, concerns were raised regarding stakeholders’ readiness to deal with the impact of BGR 62 and the withdrawal of the VAT content in PN 5/1999, considering –

  • the timing of the issuing of the BGR;
  • the length of time that the practice as per PN 5/1999 had been in place,
  • transitional issues that arise in connection with existing arrangements; and
  • systems capabilities.

In light of these concerns, BGR 62 was published on 12 December 2022 with an effective date of 1 April 2023. This was done to allow stakeholders sufficient time to make the necessary changes to agreements, systems etc. Therefore, paragraph 3 of the BGR stated that vendors could issue credit notes and make adjustments, subject to the requirements of section 21 being met, if those vendors did not manage to effect the necessary changes on time and continued to levy VAT on or after 1 Aprill 2023.

After BGR 62 was published, concern was raised that the statement in paragraph 3 of that BGR might be interpreted to mean that vendors may issue credit notes in respect of VAT historically levied on scrip lending fees before 1 April 2023, which might create an opportunity for claiming improper refunds. As a result, Issue 2 of BGR 62 dated 25 October 2023 was issued to clarify, amongst other minor changes, SARS’s view in this regard.

SARS would therefore like to clarify that both PN 5/1999 and BGR 62 (Issues 1 and 2) meet the definition of an “official publication” as defined in section 1 of the Tax Administration Act 28 of 2011 (the TA Act). The application of the law as explained in those official publications therefore constitute a “practice generally prevailing” as defined in section 1, and as further contemplated in section 5 of the TA Act. Therefore, the issuing of credit notes in respect of the VAT levied on scrip lending fees before 1 April 2023 will be contrary to the practice generally prevailing. As a result, vendors seeking to obtain undue refunds in this regard will be subject to penalties, interest and understatement penalties.

Discussion Paper on VAT Modernisation

On 8 September 2023 SARS published a Discussion Paper on VAT Modernisation. This is in pursuit of its strategic objective of modernising its systems to provide digital and streamlined online services and making it easy for taxpayers to comply with their obligations. This discussion paper sets out the high-level vision for the modernisation of the South African Value-Added Tax (VAT) administrative framework.

The intention of publishing the discussion paper was to invite businesses (vendors), accounting system software developers or suppliers, technology entities, recognised controlling bodies, public finance entities, municipal finance entities, and the public to submit contributions, and comments, as part of a consultative process to modernise the VAT administrative framework.

The comment period for the document closed on 31 October 2023 but the document is still accessible by clicking on the link here: Discussion Paper on Value-Added Tax Modernisation.

Publication of VAT rulings

The publication of VAT rulings was discussed in VAT Connect Issue 16. In order to streamline the publication process, from 1 August 2023, a sanitised template must be completed and submitted by the applicant when applying for a VAT ruling.

To assist taxpayers in this regard, SARS has published examples of sanitised VAT ruling templates available on the SARS website. SARS will make the relevant edits to the sanitised template submitted with the application and request the applicant to review the draft of the ruling, which is proposed for publishing.

Examples of VAT Rulings Sanitised Templates can be accessed by clicking on the links below:

See the VAT Rulings Process Reference Guide (Issue 4) and the VAT Section 72 Decisions Process Reference Guide (Issue 2), which have also been updated and contains further information on this topic.


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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