Navigating South Africa's Big VAT Changes and the Shift to E-Invoicing with SARS

South Africa’s Value-Added Tax (VAT) system is set for a major transformation as the South African Revenue Service (SARS) prepares to introduce a comprehensive VAT e-invoicing framework, expected to be published later this year. The move forms part of a broader VAT modernisation programme aimed at improving transparency, efficiency and compliance across the tax system.

According to the South African Institute of Taxation (SAIT), the rollout of VAT e-invoicing is expected to begin in phases from this year, with full operational capability targeted for 2028. The changes will significantly alter how businesses report, manage and account for VAT, while also tightening SARS’ visibility over economic activity.

Speaking to Business Day, SAIT acting deputy CEO Keitumetse Sesana said the modernisation programme presents clear benefits for compliant vendors but comes with increased responsibility. Under the proposed system, SARS would gain earlier and more accurate insight into business transactions, often long before VAT returns are formally submitted.

Instead of relying mainly on periodic self-assessments, SARS would increasingly be able to track VAT-related activity as it occurs. Digitally structured invoices and verified VAT numbers would allow accounting systems to transmit VAT data directly to SARS almost in real time.

Sesana said that for businesses whose systems align with SARS’ requirements, the e-invoicing regime could result in fewer documentation requests, quicker verification processes and improved turnaround times for VAT refunds. Compliance would also become more embedded in daily operations, rather than being treated as a monthly or bi-monthly administrative exercise.

However, the increased efficiency comes with heightened scrutiny. Real-time data from banks, accounting platforms and third-party systems would give SARS unprecedented insight into vendors’ operations. This enhanced visibility would allow the tax authority to identify discrepancies early, often before taxpayers themselves become aware of potential issues.

In its VAT modernisation discussion paper, SARS acknowledged that South Africa is lagging behind many countries that have already adopted electronic VAT invoicing as a core compliance tool. Internationally, the dominant trend has been the digitisation of VAT source data, enabling tax authorities to receive transaction-level information directly from vendors’ systems and ensure compliance across the entire value chain.

VAT was introduced in South Africa in 1991, replacing the general sales tax, and remains a critical and predictable source of government revenue. The system operates on a self-assessment basis using an invoice-based input tax credit method, placing responsibility on vendors to maintain accurate accounting records and documentation. Tax invoices play a central role in this framework, forming the backbone of the audit trail used to verify VAT liabilities and refunds.

While SARS has implemented technology across parts of the VAT value chain - including e-registration, eFiling and electronic payments - it has limited real-time visibility into supply chains. SARS has warned that this lack of insight exposes the fiscus to revenue leakages that are often time-consuming to detect and require frequent audits and verifications, placing a heavy burden on businesses and delaying VAT refunds.

To address these challenges, SARS plans to introduce a modern VAT return supported by the digital transmission of VAT data directly from vendors’ accounting systems. The tax authority has confirmed that these reforms will require amendments to both primary and secondary legislation.

Proposed changes include mandatory disclosure requirements for a modern VAT return, the identification of categories of vendors or transaction types that must transmit VAT data digitally, and the introduction of penalties to discourage non-compliance.

As part of the consultation process, SARS has invited input from businesses, accounting software developers, technology providers, professional bodies and the public. Stakeholders are being asked to comment on VAT data models, the digital transmission of VAT information, and the design of a modern VAT return with more detailed and disaggregated disclosure fields.

As South Africa moves toward a more digitised tax environment, businesses are being urged to prepare early by assessing their systems, processes and readiness for a future in which VAT compliance is monitored in near real time.