These FAQs answer common questions about SARS’s proposed VAT modernisation. It explains the Digital VAT Model, how implementation may work, and what different business segments may need to consider. It should be read together with the Consultation Paper.
What is SARS proposing through VAT Modernisation?
SARS is proposing a digital VAT system that allows VAT invoice data to move securely between businesses, service providers, and SARS. Over time, this will support pre-filled VAT returns, better risk checks, and future VAT auto-assessment, while taxpayers retain the right to review and correct information. VAT compliance will become more automated, less dependent on manual return preparation, and more cost-effective.
Why is SARS proposing VAT modernisation?
The current VAT process checks information after VAT returns are submitted. This can create delays, manual work, and uncertainty for taxpayers. VAT Modernisation aims to make compliance easier, improve data quality, reduce errors and fraud, and support faster, risk-based outcomes. Over time, compliant taxpayers will spend less time on corrections, reconciliations, and follow-up queries.
Who will VAT modernisation affect?
VAT Modernisation will ultimately affect all participants in the VAT ecosystem, including anyone who buys or sells goods and services. This includes all businesses where either business is registered for VAT, government and end consumers.
What is meant by the Digital VAT Model?
The Digital VAT Model is SARS’s proposed approach to combining e-Invoicing, secure invoice exchange, and e-Reporting. Its purpose is to make VAT data easier to validate and report. Businesses will eventually issue, receive, and report VAT invoice data through approved digital channels.
Why is SARS considering a five-corner decentralised model?
SARS selected the five-corner model because it enables the secure exchange of e-Invoices between businesses through accredited service providers, while simultaneously providing SARS with near real-time transaction data for compliance monitoring, VAT gap reduction, risk management, pre-filled returns, and future automation capabilities, all without creating a central government-controlled invoicing network.
What does each corner do?
The five corners are the supplier, the supplier’s service provider, the buyer’s service provider, the buyer, and SARS’s service provider. Together, they help issue, exchange, receive, and report e-Invoices securely. A business will interact with its own systems and accredited service provider, while the network manages secure exchange and reporting.
What is decentralised clearance?
Decentralised clearance means that an accredited service provider checks an e-Invoice against required rules before it is accepted and transmitted through the network. If the invoice fails the checks, it can be returned for correction.
Will SARS receive the full e-Invoice?
The model will allow SARS to receive VAT-relevant information needed for tax administration. This will be confirmed through detailed design and consultation. Data protection, confidentiality, and taxpayer rights will be built into the final framework.
How will businesses be affected?
A large business will need to connect its Enterprise Resource Planning (ERP) system to an accredited service provider so that sales invoices and supplier invoices can flow automatically into accounts receivable, accounts payable, and VAT processes. For many businesses, this may be an upgrade to existing systems rather than a completely new process.
A small business may use an affordable accounting package or service provider portal to issue and receive e-Invoices, instead of building its own system integration. Smaller businesses may also be onboarded later to allow more time to prepare. SARS may onboard VAT-registered small businesses with basic accounting software, and later support informal or manual businesses through simpler tools and assisted channels.
What should a small informal business with no accounting system start doing?
Accounting records are an essential part of the VAT system. A business without an accounting system may face tax-compliance risks. A small informal business should start keeping basic records of sales, purchases, and VAT-related documents. It does not need to build an automated system immediately. The business must keep all invoices and receipts; separate business and personal transactions; and consider using a simple mobile or low-cost accounting tool to transition to the Digital VAT Model. It may also ask SARS, a tax practitioner, industry body, or service provider about support options that may become available during phased onboarding.
What should a VAT vendor do if it is not yet required to issue e-Invoices, but a customer asks it to issue e-Invoices?
If a vendor is not part of the first or earlier implementation phase, it will not be required to comply before its scheduled onboarding. However, the vendor may choose to prepare early or participate voluntarily if this is supported by its customer. The vendor should engage with the customer to understand the request; confirm whether structured e-Invoices are needed for the customer’s readiness or pilot participation; and assess whether its current accounting or invoicing system can support e-Invoicing.
When will implementation take place?
Implementation is proposed to take place in phases, including preparation, solution development, testing, a pilot, and phased rollout. The indicative timeline starts with consultation in 2026/2027 and phased implementation from Year 2030, subject to consultation, approvals, and readiness.
Will adoption be voluntary or mandatory?
The proposed implementation starts with a pilot and voluntary participation. Mandatory adoption will follow later for specific segments and sectors. The timing will depend on readiness, risk, transaction volumes, and stakeholder feedback.
What costs may businesses face?
Costs will include software upgrades, system changes, service provider fees, testing, training, and process updates. The cost will differ depending on the size and complexity of the business. SARS will use the consultation process to better understand these impacts and consider support, particularly for small and emerging businesses.
Will SARS see all my business information?
The proposed model will allow SARS to receive only the VAT-relevant information needed for tax administration. The final data requirements will be confirmed through consultation, legislation, and detailed design.
Will I still be able to correct errors?
Yes. The proposed model does not remove taxpayers’ ability to review and correct information. Where pre-filled returns or future auto-assessments are introduced, taxpayers will retain the right to confirm, amend, or dispute outcomes. Objection and dispute rights will be dealt with in the legal and administrative framework.
Will this affect my VAT refunds?
The model is intended to improve the quality and timing of VAT data. This may help SARS process lower-risk refunds faster and focus verification on higher-risk cases.
Will a business experience fewer tax verifications and audits by SARS, and why?
Yes, where the business is compliant and the data received is complete, accurate, and consistent. The Digital VAT Model is intended to give SARS better VAT data closer to the time of the transaction, allowing SARS to focus verification and audit activity on higher-risk cases. Compliant businesses may experience fewer routine requests over time, but SARS will still be able to verify, audit, or intervene where risks, errors, or inconsistencies are identified.
Will there be enough time to prepare?
Yes. The Consultation Paper proposes a multi-year implementation journey, starting with consultation, design, testing, and pilots before phased rollout. This is intended to give taxpayers, software providers, intermediaries, and government enough time to prepare and provide feedback.
How will data security and confidentiality be protected?
The model will require secure systems, accredited service providers, and clear rules on confidentiality and data protection. Only authorised participants will be able to send, receive, or access information. The detailed safeguards will be developed through legislation, standards, and consultation.
