South Africa Proposes Major VAT Reforms to Modernize Tax System

South Africa’s 2025 draft TLAB and TALAB propose major VAT reforms to modernise the system and close compliance gaps. Key changes include extending intermediary rules to local suppliers, zero-rating silver exports and clinical trial services, exempting all basic education supplies (forcing some schools to deregister), removing low-value import thresholds, and tightening VAT registration with site inspections. The VAT Modernisation Project will support e-Reporting and digital compliance. Businesses, especially in education, e-commerce, and cross-border trade, must prepare for higher compliance requirements and system upgrades.

Key Proposed VAT Changes

• VAT & Intermediaries: Extend rules so intermediaries can account for VAT on behalf of local suppliers, not just foreign electronic service providers.
• Silver Exports: Amend VAT Act to allow zero-rating of silver exports under similar documentary requirements as gold.
• Clinical Trials: Zero-rate testing services and related goods supplied to non-resident clients to maintain global competitiveness.
• Education: Make all basic education-related supplies VAT-exempt. Private schools may need to deregister for VAT and make change-of-use adjustments for past input claims. Past assessments before Jan 2026 will not be reopened.
• VAT Registration: SARS may conduct site inspections to verify business premises, even for home-based businesses (limited to trade areas).
• Foreign Airtime Vouchers: Only distribution services within South Africa subject to VAT; airtime consumption offshore remains out-of-scope.
• Low-Value Imports: Remove the R500/R100 thresholds to level the playing field between domestic and foreign suppliers.
• VAT Modernisation Project: Introduce definitions to support e-Reporting and digital compliance. Goal: streamline compliance, reduce errors/fraud, improve tax administration, and expand regulatory powers.

This package is one of the most comprehensive VAT updates in recent years, aiming to modernise administration and close gaps in the tax base. Key measures—such as removing low-value import exemptions—will impact e-commerce and logistics, potentially raising costs for consumers but protecting local suppliers. The education VAT exemption could significantly affect private schools’ cash flow and pricing models. Extending intermediary rules and zero-rating clinical trial services should improve compliance and competitiveness. Businesses must prepare for tighter registration checks, new reporting obligations, and potentially mandatory digital invoicing in the future. Early system upgrades and compliance planning will be critical to avoid disruption.