By Lebone Rodah Mosima
The South African Revenue Service (SARS) has launched a VAT modernisation initiative aimed at enabling the secure, structured and near-real-time flow of VAT transaction data across the value chain.
The initiative follows SARS’s stated ambition of moving towards a future in which tax obligations are largely automated through the effective use of data and technology.
SARS has released its VAT Modernisation Consultation Paper for public comment, following its 2023 VAT Modernisation Discussion Paper. The revenue service is calling on affected and interested stakeholders to contribute to the development of a modern, transparent and efficient VAT administration system.
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“The feedback from the 2023 Discussion Paper on Modernisation has greatly enriched the direction for VAT modernisation and we are thankful to all stakeholders for their valuable inputs,” SARS said.
“We have incorporated these inputs and made significant progress from the initial position and included the best practices from our peers and multilateral organisations’ consultations.”
SARS said the consultation paper is the result of an inclusive process that incorporates stakeholder proposals, international best practices and further refinement of its VAT modernisation plans.
The paper proposes a Digital VAT Model combining e-Invoicing, an Interoperability Framework and e-Reporting. The model is intended to modernise VAT administration, ease compliance and strengthen oversight.
“The proposals form part of SARS Modernisation 3.0,” SARS said.
“The transformation will enable a long-term shift to a digitally driven, transparent and resilient VAT administration.”
SARS said the changes would provide taxpayers with a simpler and more predictable experience, with less administrative effort and greater certainty.
SARS Commissioner Johnstone Makhubu described the release of the consultation paper as a significant milestone in the modernisation of South Africa’s VAT system.
“VAT Modernisation is a crucial step in reshaping VAT administration in South Africa,” Makhubu said.
“It seeks to move us from a system that is still too dependent on manual processes and retrospective verification, to one where VAT compliance becomes part of the systems businesses already use every day.”
Makhubu said the modernisation would reduce the compliance burden on vendors, strengthen compliance and protect revenue needed to fund the country’s development priorities.
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SARS said the proposed Digital VAT Model would provide benefits for both the revenue service and VAT vendors.
For SARS, the secure sharing of reliable VAT transaction data would improve visibility of VAT activity, data accuracy and risk-based compliance oversight. It would also strengthen the detection and response to fraud and help reduce the VAT compliance gap.
VAT vendors are expected to benefit from a simpler and more predictable compliance process, reduced administrative costs and effort, greater visibility and faster processing of VAT information.
“The wider economy could also benefit from better data quality, less duplication, trusted digital exchanges among businesses, service providers, and SARS, smoother trade processes, efforts to close the VAT compliance gap, and a more transparent and trusted tax ecosystem,” SARS said.
Makhubu said SARS was seeking practical, evidence-based input to ensure the final model was feasible, applicable and suited to South Africa’s economic realities.
“The long-term vision is a VAT system where tax compliance becomes a seamless part of ordinary business activity. We are, however, clear that this must be developed in consultation with stakeholders so that the final model is secure, inclusive, and aligned to South Africa’s needs,” he said.
He said the modernisation represented a paradigm shift in the use of data and was aligned with SARS’s vision of building a Smart Modern SARS.
SARS said the proposed Digital VAT Model would be introduced through a phased and consultative process.
Stakeholder feedback will inform policy decisions, technical designs, implementation strategies, readiness requirements, costs, risks, benefits, governance structures, standards and safeguards.
SARS said the consultation paper marked the beginning of a long-term reform of the VAT ecosystem.
It urged affected and interested stakeholders to review the paper and submit written comments by 16 October 2026.
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The consultation paper is available on the SARS website.
“Comments must be submitted through the response mechanism provided in the Consultation Paper,” SARS said.
