South Africa Opens Consultation on New Digital VAT Model

The newly released VAT Modernisation Consultation Paper builds on the 2023 Discussion Paper and sets out a model combining e-Invoicing, an interoperability framework and e-Reporting.

The South African Revenue Service (SARS) is inviting businesses, tax professionals, technology providers and other interested groups to help shape the next phase of the country's VAT system, opening public consultation on a proposed Digital VAT Model designed to make tax reporting more closely connected with everyday business transactions.

The newly released VAT Modernisation Consultation Paper builds on the 2023 Discussion Paper and sets out a model combining e-Invoicing, an interoperability framework and e-Reporting. SARS sees these components as the foundation for a system where structured VAT transaction data can move securely across the VAT value chain in near real time, reducing the current reliance on manual processes and checks performed after transactions have already taken place.

Digital VAT could change how businesses handle tax reporting

At the centre of the proposal is the idea that VAT compliance should become part of the accounting, invoicing and financial systems businesses already use, rather than remaining a separate administrative exercise that requires companies to prepare and submit information through additional processes.

SARS said responses received following its 2023 Discussion Paper played an important role in refining the model. The revenue service has also considered international practices and work undertaken by peer tax administrations and multilateral organisations, giving the latest Consultation Paper a broader base than the initial modernisation proposal.

SARS Commissioner Dr Johnstone Makhubu described the publication as an important milestone for South Africa's tax administration, saying the changes could move VAT management away from a system that remains heavily dependent on manual procedures and retrospective verification.

For compliant VAT vendors, that shift could mean less administrative work, lower compliance costs and a more predictable experience when dealing with VAT information. Faster processing and clearer visibility over submitted transactional information are also among the benefits SARS expects the model to deliver.

SARS wants better data to strengthen VAT oversight

The proposed system would give SARS access to more reliable and structured transactional data, allowing the revenue authority to develop a clearer picture of VAT activity and identify potential compliance problems earlier.

Better-quality information could strengthen risk-based oversight and improve SARS's ability to detect fraud, while helping the revenue service focus its resources on transactions or vendors presenting genuine compliance concerns rather than placing unnecessary administrative pressure on businesses that consistently meet their obligations.

The impact could extend beyond tax administration. A trusted digital exchange connecting businesses, service providers and SARS could reduce duplicated reporting, simplify some business processes and support smoother commercial activity, particularly if common standards allow different accounting and invoicing systems to communicate effectively.

Makhubu said SARS believes modernisation can reduce the burden on compliant vendors while protecting the revenue South Africa needs to fund its development priorities. The broader vision is a VAT environment where meeting tax obligations becomes a natural part of ordinary commercial activity instead of a separate process carried out after transactions are completed.

Public feedback will influence how the system is introduced

SARS is not proposing to introduce the entire Digital VAT Model at once. The Consultation Paper describes a phased approach in which stakeholder feedback will influence policy decisions, technical architecture, implementation timelines, readiness requirements and the standards businesses and service providers may eventually need to follow.

Comments are also expected to help SARS understand implementation costs, operational risks, expected benefits, governance arrangements and safeguards required to create a system that is secure and practical for South Africa's diverse business environment.

The consultation gives affected organisations an opportunity to raise concerns about issues such as system readiness, interoperability, data security and the practical demands that digital VAT reporting could place on businesses of different sizes.

SARS has asked interested and affected stakeholders to study the Consultation Paper and submit written comments by 16 October 2026 through the response mechanism provided in the document.

The VAT Modernisation Consultation Paper is available on the SARS website and marks the start of what the revenue service describes as a longer-term reform of the country's VAT ecosystem, with stakeholder participation expected to play a central role in deciding how South Africa's move towards digitally integrated VAT administration takes shape.