VAT, GST and Sales Tax in South Africa

Summary

Name of the tax Value-added tax (VAT)
Date introduced 30-Sep-91
European Union (EU) Member State No
Member of the Southern African Customs Union Yes
Administered by Commissioner for the South African Revenue Service (SARS) (http://www.sars.gov.za)
VAT rates
Standard 14%
Other Zero-rated and exempt
VAT number format 4220122222
VAT return periods
Monthly Annual taxable supplies in excess of ZAR30 million
Bimonthly Annual taxable supplies of less than ZAR30 million, determined by the commissioner
Six-monthly or annually Annual taxable supplies of less than ZAR1.5 million by farmers, farming enterprises, nonprofit associations (special cases)
Thresholds
Registration Annual taxable supplies of more than ZAR1 million Foreign suppliers of electronic services to South African residents exceeding ZAR50,000
Recovery of VAT by non-established businesses Yes (in limited circumstances)

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in South Africa by a registered person
  • Reverse-charge services received by a person in South Africa that is not entitled to claim full input tax credits (referred to as imported services)
  • The importation of goods from outside South Africa, regardless of the status of the importer

Goods that are imported from countries in the Southern African Customs Union (that is, Botswana, Lesotho, Namibia, South Africa and Swaziland) are not subject to customs duty, but they are subject to VAT.

Who is liable

Goods and services supplied in South Africa. A vendor is required to account for output tax on all goods and services supplied, unless the supply is specifically exempted by the Value-Added Tax Act.

A “vendor” (taxable person) is a person (business entity or indi­vidual) carrying on an activity in or partly in South Africa on a continuous or regular basis if, in the course of the activity, goods or services are supplied to another person for consideration exceeding the registration threshold. This includes persons who are registered for VAT in South Africa as well as persons who are required to register as vendors.

A person is required to register as a vendor if the value of taxable supplies exceeds (or is expected to exceed) ZAR1 million in any consecutive 12-month period or a signed contract is in place proving that the ZAR1 million threshold will be exceeded in the following 12-month period (except for some electronic services; see E-commerce suppliers).

Importers are liable to pay VAT on imported goods. There are certain exemptions where VAT is not chargeable, like when goods are donated by a nonresident to an association not for gain, per­sonal use goods imported by tourists and goods temporarily admitted for processing or repairs.

Recipients of services are liable to pay VAT on imported services to the extent that the services will be utilized or consumed in the making of nontaxable supplies. Imported services are exempt from VAT if the value of the supply does not exceed ZAR100 per invoice.

Voluntary registration. A person whose turnover is below the compulsory registration threshold may register for VAT on a voluntary basis if the value of its taxable supplies exceeds ZAR50,000 in any 12-month period (excluding the provision of commercial accommodation, for which the threshold is ZAR120,000). Certain industries such as welfare organizations, projects funded by foreign donors, and municipalities can regis­ter even if they don’t meet the voluntary registration threshold.

Group registration. VAT grouping is not allowed under the South African VAT law. All legal entities must register for VAT indi­vidually. VAT is charged on transactions between separately reg­istered entities within a commercial group in accordance with the general VAT rules and subject to the rules relating to supplies between related persons.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in South Africa. A non-established business that makes taxable supplies of goods or services continuously or regularly in South Africa must appoint a tax representative and open a South African bank account to register for VAT. The VAT authorities may appoint any person as an agent for any other person to recover amounts due to the SARS.

E-commerce suppliers. Effective 1 June 2014, the supply of elec­tronic services by a foreign supplier to recipients in South Africa is subject to VAT. The liability to register for VAT will arise where the electronic services are supplied from a place outside South Africa to a recipient that is a resident of South Africa or where payment to the non-established business originates from a South African bank. Effective 1 April 2015 this specific inclusion applies where at least two of the following circumstances are present:

  • The electronic services are supplied to a South African resident
  • Any payment for such services is made from a South African bank
  • The electronic services are supplied to a person with a business address, residential address or postal address in South Africa where a tax invoice will be delivered

The term “electronic services” is defined in a regulation that provides that the following services are electronic services where provided by means of an electronic agent, electronic communica­tion or the internet for consideration:

  • Educational services (distance teaching programs, educational webcasts, internet-based courses, internet-based educational programs or webinars, if the person supplying the educational service is not regulated by an educational authority in the for­eign country)
  • Games and games of chance (electronic games, interactive games and electronic betting or wagering)
  • Internet-based auction services
  • Miscellaneous services (e-books, audio visual content, still images and music)
  • Subscription services (to any blog, journal, magazine, newspa­per, games, internet-based auction service, periodical, publica­tion, social networking service, webcast, webinar, website, web application or web series).

A special compulsory registration threshold of ZAR50,000 applies to the suppliers of electronic services (with no time limit), and VAT is accounted for on a payments basis to the tax authorities.

Deemed supplies. In addition to actual goods and services sup­plied by a vendor, the VAT Act also deems certain supplies to be supplies of goods or services. The person making the deemed supply is liable to pay VAT. Deemed supplies include the following:

  • Ceasing to be a vendor
  • Short-term indemnity payments
  • Change in use
  • Excess payments not refunded within four months
  • Fringe benefits
  • Receipts of payments from government by designated entities for purposes of taxable supplies
  • Trading stock used for private purposes
  • Betting and gambling transactions

Tax representatives. A registered VAT vendor needs to appoint a natural person residing in RSA as a tax representative to assist in tax matters and to represent the entity in South Africa.

Reverse charge. In South Africa, a reverse charge only applies if the services are intended to be used in the making of nontaxable supplies by the recipient of the services. The recipient of the services is liable to account for the VAT thereon.

Registration procedures. A VAT 101 form needs to be completed and supporting documentation such as the following needs to be presented (note that exact requirements change regularly and can differ per office):

  • Company registered in South Africa with the Companies and Intellectual Property Commission (CIPC):
    • Copy of certificate of incorporation
    • Copy of identity document or passport of two members/ directors/shareholders/trustees of the company
    • Bank details
    • Original letter from bank
    • Three months’ bank statements with original bank stamp
    • Copy of financial information listed as source under finan­cial particulars (to determine value of taxable supplies (no cash flow projections or business plans will be accepted)
    • If a practitioner is submitting the application on behalf of a vendor, a power of attorney authorizing the practitioner to act on behalf of the vendor
    • Copy of identity document, driving license or passport of representative vendor
    • For holding/subsidiary company or nonresident company — VAT 119i form indemnity for banking details where third party’s bank details are used
    • VAT 121 form if tax period is category E
    • Confirmation of business address
    • Recent copy of the business municipal account, or utility bill or CRA01 form
    • Confirmation of residential address
    • Recent copy of the residential municipal account, or util­ity bill or CRA01 form of individual, partner or repre­sentative vendor
  • Non-established company:
    • Copy of certificate of incorporation – if in a foreign lan­guage it must be translated in writing into English
    • If the foreign company has a physical presence in South Africa, copy of the municipal account of the business must be submitted
    • Where the foreign company has no physical/business address in South Africa; proof of the physical address of the representative vendor is required
    • Certified copy of passport documents of the members direc­tors/shareholders/trustees of the company
    • Copies of financial information listed as source in the financial particulars section of the application form to determine value of taxable supplies. If the value is not in South African currency, the South African rand equivalent must be provided (no cash flow projections or business plans will be accepted)
      • Bank details
      • Original letter from bank
      • Three months’ bank statements with original bank stamp – VAT 119i form indemnity for banking details where third party’s bank details are used
      • Relevant material required for representative vendor/ authorized practitioner
      • In case of a practitioner, a Letter of Authority or Power of Attorney to authorize the practitioner to act on behalf of the applicant
      • Certified copy of identity document of representative vendor
  • “Electronic service” company:
    • Copy of certificate of incorporation
    • Proof of registration with foreign authority; i.e., issued Tax Registration Certificate issued in the country of residence confirming registration of any tax administered by that for­eign country
    • Copy of identity document or passport of the appointed foreign representative or specified contact person with regards to the registration application
    • Copy of a recent bank statement from the South African registered bank in South Africa (if a bank account was opened in South Africa – it is, however, not a requirement to have a South African bank account in the case of registering a foreign electronic service provider)

Late-registration penalties. A person has to register for VAT within 21 days after becoming liable for registration. A 10% late payment penalty, interest at the prescribed rate (currently 10.5% per annum) and an understatement penalty of between 5% and 200% of the VAT payable may be levied in a case where a person registers late. Where such late registration is made under a volun­tary disclosure application, the understatement penalty will not be levied and the person can apply for a remission of the 10% late payment penalty.

Digital economy. See E-commerce suppliers above.

Deregistration. A vendor can apply to SARS to be deregistered if its taxable supplies during a 12-month period is below the ZAR1 million threshold. If a vendor’s taxable supplies during a 12-month period is below the voluntary registration threshold of ZAR50,000 the commissioner will automatically deregister the person.

If a vendor ceases to carry on all enterprises, the commissioner must be notified within 21 days.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are subject to tax at either the standard rate (14%) or zero rate (0%). A vendor must account for VAT at the standard rate on all supplies of goods and services, unless the supply is specifically exempted or zero-rated under the VAT Act.

Examples of goods and services taxable at 0%

  • Exports of goods and related services
  • International transport of passengers and goods, and related services
  • Certain supplies of goods that are used exclusively in an export country
  • Services supplied outside South Africa and to foreign branches and head offices
  • Certain basic foodstuffs
  • Illuminating kerosene and leaded and unleaded gasoline
  • Supply of gold coins issued by the reserve bank
  • Supply of an enterprise capable of separate operation as a going concern (provided that all of the requirements are met)
  • Supply of fuel levy goods and certain fuels obtained from crude to be refined to produce fuel levy products
  • Receipt of certain grants
  • Supply of intellectual property for use outside of South Africa
  • Supply of services to nonresidents subject to certain provisions
  • Triangular supplies (the vendor supplies goods to a nonresident but delivers them in South Africa; special requirements apply)

The term “exempt supplies” refers to supplies of goods and ser­vices that are not subject to tax. A vendor is not entitled to claim a deduction on expenses incurred to make exempt supplies

Examples of exempt supplies of goods and services

  • Financial services, including Sharia finance premiums
  • Fare-paying passenger transport by road or rail
  • Educational services
  • Child care
  • Donated goods supplied by certain nonprofit (charitable) bod­ies
  • Rental of residential accommodation
  • Immovable property located outside South Africa
  • The supply of goods by a non-established business before the goods are entered for home consumption, unless the non-established business applies in writing to the SARS to have the supplies zero-rated
  • Certain supplies made by bargaining councils to their members are exempt from VAT. The exemption was previously limited to situations in which the supplies were covered by membership contributions.

Option to tax for exempt supplies. Not applicable.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.”

In South Africa, the basic time of supply is the earlier of the issu­ance of an invoice or the receipt of payment.

Other tax points are used for a variety of situations, including betting transactions, construction supplies made from vending machines and “lay-by” sale agreements.

The tax point for supplies of goods between related persons is when the goods are removed by or made available to the pur­chaser or recipient of the goods. The time of supply for the supply of services between related persons is when the services are performed.

The tax point for goods consigned or delivered to a branch or main business outside South Africa is when the goods are actu­ally consigned or delivered. The tax point for services supplied to a branch or main business outside South Africa is when the ser­vices are performed.

Continuous supplies. The tax point for periodic supplies is the earlier of the date on which payment is due or the date on which payment is received.

Installment credit agreements. For installment credit agreements, the supply is deemed to take place at the earlier of when the goods are delivered or any payment of consideration is made.

Immovable property. The supply of immovable property is deemed to take place at the earlier of the following dates:

  • The date on which the registration of the transfer is made in a deeds registry
  • The date on which payment is received

Imported goods. The tax point for imported goods varies depend­ing on the source of the goods being imported. The following are the applicable rules:

  • For goods that are imported from a Southern African Customs Union country: when the goods are brought into South Africa at the border post
  • For goods imported from other countries: when the goods are cleared for home consumption
  • For goods imported and entered into a licensed Customs and Excise storage warehouse: when the goods are cleared from the warehouse for home consumption

Where an importer is registered for VAT purposes and will utilize or consume the imported goods in the making of taxable sup­plies, the importer may claim the VAT paid on importation as an input tax deduction. Where a customs deferment account is used by the importer (or its clearing agent) the importer needs to ensure that the VAT is paid to SARS before it claims an input tax deduction. Effective 1 April 2015, the importer will be entitled to claim the VAT paid on importation as an input tax deduction in the tax period in which the goods are released in terms of the customs and excise act.

Recovery of VAT by taxable persons

A registered vendor may recover input tax (that is, VAT charged on goods and services supplied to it for business purposes) by deducting it from output tax, which is VAT charged on supplies made in a particular tax period provided they have valid tax invoices.

Input tax includes VAT charged on goods and services supplied in South Africa and VAT paid on the importation of goods.

Secondhand goods. A vendor is entitled to an input tax deduction on the acquisition of secondhand goods located in South Africa. Secondhand goods are specifically defined as goods that were previously owned and used, excluding animals. The definition of “secondhand goods” was amended with effect from 1 April 2015 to exclude gold and goods containing gold. This definition has subsequently been amended to exclude goods consisting solely of gold and gold coins. Other secondhand goods containing gold, such as computers or watches, acquired for the sole purpose of supplying those goods in substantially the same state, still qualify for the notional input tax deduction with effect from 1 April 2017. In addition, the VAT Act was amended to make it clear that a vendor must hold a completed VAT264 – Declaration (http://tinyurl.com/z2pjkr8) for supply of secondhand repos­sessed or surrendered goods – External Form.pdf in order to deduct notional input tax on secondhand goods acquired.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for taxable pur­poses (for example, goods acquired for private use or services used for making exempt supplies). In addition, input tax may not be recovered for specifically excluded business expenditure, such as entertainment.

Examples of items for which input tax is nondeductible

  • Purchase or hire of a motor car (subject to certain exceptions)
  • Business and staff entertainment (subject to certain exceptions)
  • Business gifts (to the extent that the gift constitutes “entertain­ment,” as defined)
  • Club subscriptions

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Purchase, hire and maintenance of vans and trucks
  • Attendance at conferences and seminars
  • Vehicle maintenance costs (including motor cars)
  • Mobile phones
  • Air transport within South Africa
  • Aviation fuel
  • Trading stock
  • Raw materials
  • Marketing expenditure

Partially deductible input tax (partial exemption). Input tax direct­ly related to the making of exempt supplies is not recoverable. If a taxable person makes both exempt and taxable supplies, it may recover only a portion of the input tax incurred. In South Africa, the deductible portion is determined using the following two-stage calculation:

  • The first stage identifies the input tax directly attributable to taxable and exempt supplies. Input tax directly attributable to taxable supplies is deductible, while input tax directly related to exempt supplies is not deductible.
  • The second stage identifies the amount of the remaining input tax (for example, input tax on general business overhead) that cannot be directly attributed to the making of taxable or exempt supplies. Such input tax may be deducted only to the extent that it relates to the making of taxable supplies. In general, the deductible portion is determined by comparing the value of tax­able supplies to total supplies. However, a vendor may apply to the SARS for another equitable apportionment method (for example, apportionment based on floor space or activity), par­ticularly if significant investment income, foreign-exchange gains or other nontaxable passive income is realized.

Refunds. If the amount of input tax recoverable in a period exceeds the amount of output tax payable in that period, a refund of the excess may be claimed.

The SARS pays interest at the prescribed rate if it does not pay the refund claimed within 21 business days after the date on which the VAT return is received by the SARS. The SARS is not liable for interest if the vendor did not provide bank account details, if the returns furnished were incomplete or defective in any material respect or if the return is being investigated.

Preregistration costs. Where goods or services are acquired for or on behalf of a company or in connection with incorporation of that company, the goods or services will be deemed to be received by that company if the person who paid the cost was reimbursed and the goods were acquired in the carrying out of that company’s enterprise. The goods or services will be deemed to have been paid by that company in the same tax period during which the reimbursement took place. This shall not apply in any of the following circumstances:

  • Expenses occurred more than six months prior to incorpora­tion.
  • The company does not have sufficient records to substantiate that the goods or services received were taxable supplies.
  • The expenses relate to secondhand goods.

Recovery of VAT by non-established businesses

VAT incurred by businesses that are neither established nor reg­istered in South Africa may be recovered only with respect to goods that are exported from South Africa. The goods must be exported from a designated port within 90 days after the invoice date. A refund may be claimed from the VAT Refund Administrator. No claim may be made with respect to services (such as hotel accommodation and restaurant meals) consumed in South Africa.

A business that regularly or continuously supplies goods or ser­vices in South Africa may be liable to register as a VAT vendor, even though the business is neither established nor registered in South Africa, if it carries on an enterprise and meets the registra­tion requirements. In this instance, the non-established business registered as a vendor may recover input tax through the normal VAT return process.

Invoicing

VAT invoices and credit notes. Vendors are required to issue a full tax invoice for all supplies made if the consideration (that is, the total amount received inclusive of VAT) amounts to ZAR5,000 or more. If the total amount in money for the supply is less than ZAR5,000, the supplier may issue an abridged tax invoice. Tax invoices may be issued electronically if the encryption meets SARS requirements and if the invoice recipients agree in writing to accept electronic invoices.

The following information is required to be on a full tax invoice:

  • The words “tax invoice,” “VAT invoice” or “invoice” (however, a pro forma invoice is not a tax invoice)
  • The name, address and VAT registration number of the supplier
  • The name, address, and where the recipient is a registered ven­dor and the VAT registration number of the recipient
  • An individual serialized number and the date on which the tax invoice was issued
  • Full description of the goods or services supplied
  • Quantity or volume of goods or services supplied
  • The value of the supply, VAT amount and the VAT-inclusive amount of the supply

The following information is required for an abridged tax invoice:

  • The words “tax invoice,” “VAT invoice” or “invoice” (however, a pro forma invoice is not a tax invoice)
  • The name, address and VAT registration number of the supplier
  • An individual serialized number and the date on which the tax invoice was issued
  • Full description of the goods or services supplied
  • Quantity or volume of goods or services supplied
  • The value of the supply, VAT amount and the VAT-inclusive amount of the supply

Registered foreign suppliers of electronic services are required to issue abridged tax invoices.

In some cases, tax invoices need not be issued (for example, for certain periodic supplies) if the underlying documentation, such as a rental agreement, includes the information contained in a tax invoice.

A VAT credit note or debit note may be used to reduce VAT charged and reclaimed on a supply of goods or services. A credit note or a debit note may be issued only if the tax charged is incor­rect or if the supplier has paid incorrect output tax as a result of one or more of the following circumstances:

  • The supply has been cancelled
  • The nature of the supply has been fundamentally varied or altered
  • The previously agreed consideration has been altered by agree­ment with the recipient of the supply
  • All or part of the goods or services has been returned to the supplier
  • An error has occurred in stipulating the amount of consider­ation agreed upon for that supply

If a credit note adjusts the amount of VAT charged, it must be clearly marked “credit note” and must refer to the original tax invoice. It must briefly indicate the reason that it is being issued and provide sufficient information to identify the transaction to which it refers.

With effect from 1 April 2015, agents must issue a tax invoice within 21 days of making a supply on behalf of a principal. Furthermore, an agent importing goods on behalf of a principal is required to issue a statement to the principal containing certain particulars in regard to importations for a particular period.

Proof of exports. Exports can be classified as either direct exports or indirect exports. Direct exports (that is, the selling vendor is responsible to deliver the goods at an address outside South Africa) can be zero-rated if certain documentary requirements are met. In the case of indirect exports (that is where the recipient is responsible for exporting the goods from South Africa), the supplying vendor may only zero-rate the supply if the goods are supplied to a non-established recipient and the supplier ensures that the goods are delivered at a designated harbor or airport from where the recipient exports the goods, or the goods are delivered to the recipients appointed agent that exports the goods via road or rail.

Documentation that must be retained in the case of a direct export, is:

  • A copy of the zero-rated tax invoice
  • The customer’s order or the contract between the customer and supplier
  • The customs documentation
  • Proof that the movable goods have been received by the cus­tomer in the export country
  • The transport documentation as required for the relevant mode of transport (i.e., road manifest, a copy of the combined con­signment note and wagon label issued by the rail operator, or a copy of the container terminal order or freight transit order issued by the container operator or the rail operator, the sea freight transport document or the airfreight transport docu­ment)
  • Proof of payment for the movable goods supplied to the cus­tomer

Where the supplier contracts with a cartage contractor to deliver the goods to a customer outside South Africa the following addi­tional documentary proof:

  • Proof that the supplier paid the transport costs
  • In the case of transport by road, a copy of the proof of delivery issued by the cartage contractor that the movable goods have been received by the customer in the export country

Documentation that must be retained in the case of an indirect export where the supplier elects to apply a zero-rate, is:

  • A copy of the zero-rated tax invoice
  • A copy of the customer’s trading license (i.e., a document indi­cating that the customer is carrying on a business outside South Africa)
  • The customer’s order or the contract between the customer and supplier
  • Proof of payment for the movable goods supplied to the cus­tomer
  • A letter from the customer authorizing a person to represent the customer and a copy of such person’s passport
  • Proof of delivery of the goods to the harbor or airport
  • Export documentation

Documentation that must be retained in the case of an indirect export where the supplier elects to apply a zero-rate and where the customer’s agent exports the goods from South Africa via road or rail, is:

  • A copy of the zero-rated tax invoice
  • A copy of the customer’s trading license (i.e., a document indi­cating that the customer is carrying on a business outside South Africa)
  • A letter from the customer authorizing a person to represent the customer and a copy of such person’s passport
  • The customer’s order or the contract between the customer and the supplier
  • Proof of payment for the movable goods supplied to the cus­tomer (the proof of payment must be in compliance with South African Reserve Bank (SARB) requirements where applicable)
  • Proof of delivery of the goods to the customer’s agent’s prem­ises
  • A statement from the customer’s agent containing an inventory reconciliation of all the movable goods received from the sup­plier and exported by the agent or a cartage contractor engaged by either the customer or its agent to the customer
  • Confirmation of the proof of export from the customer’s agent

Foreign-currency invoices. In general, a tax invoice must be issued in South African rand (ZAR). However, if the invoice relates to a zero-rated supply, the tax invoice may be issued in any currency. If an invoice is issued in a foreign currency, the rand equivalent of the net amount, the VAT amount and the gross amount (or just the gross amount with a statement that it includes 14% VAT) must be disclosed on the invoice and must be deter­mined using the appropriate exchange rate on the date of the time of supply (the daily exchange rate quoted on the South African Reserve Bank’s website may be used for this purpose). Invoices issued by foreign electronic services suppliers may be translated to ZAR using the rates published by the South African Reserve Bank, Bloomberg or the European Central Bank.

VAT returns and payment

VAT returns. The tax return period is monthly for persons with annual taxable turnover in excess of ZAR30 million. The tax return period is bimonthly for persons with annual taxable turn­over below ZAR30 million. Other tax periods are available (six-month and annually) for special categories of persons with annual taxable supplies lower than ZAR1.5 million, such as farmers, farming enterprises and nonprofit associations, but only with the prior agreement of the SARS.

VAT returns must be filed by the 25th day after the end of the tax period or, if returns are filed and paid electronically through the SARS eFiling system, by the end of the month following the tax period. Payment is due in full by the same date. If the due date falls on a Saturday, Sunday or a public holiday, the due date is the last business day before the 25th, or the last business day before the end of the month in the case of electronic filing.

Penalties

A penalty equal to 10% of the net VAT due is imposed if the VAT return is submitted late or if the VAT payment is made after the due date. The SARS may remit the penalty if satisfied that:

  • The penalty has been imposed for a first incidence of noncom­pliance or involved an amount of less than ZAR2,000
  • Reasonable grounds for the noncompliance exist
  • The noncompliance at issue has been remedied
  • If exceptional circumstances are present

Interest. Interest is charged at the prescribed rate on late pay­ments of VAT, calculated for each month or part of a month. A vendor may request the SARS to remit interest if the late payment was due to circumstances beyond the vendor’s control (like natu­ral or human disaster, civil disturbance or disruption and serious illness or accident).

Understatement penalty. In the case of an understatement, the taxpayer has to pay, in addition to the VAT payable, an understate­ment penalty determined according to an understatement penalty percentage table, which ranges between 5% and 200%. An under­statement means prejudice to the SARS or the fiscus in respect of a tax period as a result of:

  • A default in rendering a return
  • An omission from a return
  • An incorrect statement in a return

Where a default is disclosed to SARS under a voluntary disclo­sure application before SARS commences with an audit or inves­tigation, the understatement penalties are reduced to 0%.

A range of other offenses related to VAT can result in additional tax and penalties, including fines and, for severe offenses, impris­onment for a period not exceeding 24 months.