SARS had outlined a proposed Digital VAT Model under its Modernisation 3.0 programme, with phased implementation from 2030 aimed at increasing automation and improving VAT administration. SARS had invited stakeholders to comment on the proposed reforms by 16 October 2026.
The South African Revenue Service (SARS) announced on 18 September 2026 the publication of FAQs addressing its proposed VAT modernisation programme. The document explains the proposed Digital VAT Model, its implementation, potential business impacts and the transition towards more automated VAT administration.
The FAQs should be read together with the Consultation Paper, which invites interested parties to submit comments by 16 October 2026.
The proposed reform forms part of SARS’s wider Modernisation 3.0 programme and seeks to move VAT administration away from retrospective, declaration-based processes towards structured e-Invoicing, interoperability, e-Reporting and, over time, progressively automated VAT assessment.
Digital VAT Model
SARS is proposing a digital VAT system under which VAT invoice data could be securely exchanged between businesses, service providers and SARS. The model is intended to support pre-filled VAT returns, stronger risk checks and future VAT auto-assessment, while retaining taxpayers’ rights to review, amend or dispute information.
The proposed system combines e-Invoicing, an Interoperability Framework (IF) and e-Reporting within a Decentralised Continuous Transaction Control and Exchange (DCTCE) framework, referred to as the “Digital VAT Model”.
SARS is considering a five-corner decentralised model involving the supplier, the supplier’s service provider, the buyer’s service provider, the buyer and SARS’s service provider. Accredited service providers would check e-Invoices against required rules before they are accepted and transmitted through the network.
The model is intended to give SARS access to VAT-relevant information needed for tax administration, with final data requirements to be determined through consultation, legislation and detailed design. SARS has said that data protection, confidentiality and taxpayer rights will form part of the framework.
Phased implementation proposed
Implementation is proposed to proceed through preparation, solution development, testing, a pilot and phased rollout. The indicative timeline begins with consultation in 2026/2027, followed by phased implementation from Year 2030, subject to consultation, approvals and readiness.
The initial stages would involve a pilot and voluntary participation, with mandatory adoption planned later for specific segments and sectors. The sequencing may change based on factors including ease of adoption, compliance risk, VAT gap indications, transaction volumes, readiness and stakeholder feedback.
Impact on businesses
Large businesses are expected to connect Enterprise Resource Planning (ERP) systems to accredited service providers so that sales and supplier invoices can flow into accounts receivable, accounts payable and VAT processes. For some businesses, this could involve upgrades to existing systems rather than entirely new processes.
Smaller businesses may use accounting packages or service provider portals to issue and receive e-Invoices. SARS may onboard VAT-registered small businesses using basic accounting software before extending support to informal or manual businesses through simpler tools and assisted channels.
Businesses without accounting systems are encouraged to maintain basic records of sales, purchases, invoices, receipts and VAT-related documents and to keep business and personal transactions separate.
Businesses could face costs associated with software upgrades, system changes, service provider fees, testing, training and process updates. SARS said the consultation would help assess these impacts and consider support measures, particularly for small and emerging businesses.
Compliance and VAT refunds
The Digital VAT Model is intended to improve data quality, reduce errors and fraud, and allow SARS to conduct more risk-based verification and audit activity.
Where businesses provide complete, accurate and consistent information, compliant taxpayers may face fewer routine verification requests over time. However, SARS would retain the ability to verify, audit or intervene where risks, errors or inconsistencies arise.
Improved VAT data could also support faster processing of lower-risk VAT refunds while allowing SARS to focus verification on higher-risk cases.
The proposed framework would not remove taxpayers’ ability to correct errors. Where pre-filled returns or future auto-assessments are introduced, taxpayers would continue to be able to confirm, amend or dispute outcomes, with objection and dispute rights addressed through the relevant legal and administrative framework.
Consultation and safeguards
SARS said the multi-year approach was intended to give taxpayers, software providers, intermediaries and government time to prepare, test systems and provide feedback.
The proposed Digital VAT Model would rely on secure systems, accredited service providers and rules governing confidentiality and data protection. Only authorised participants would be permitted to send, receive or access information.
The Consultation Paper seeks stakeholder views on the design of the Digital VAT Model, the phased implementation pathway, taxpayer and software-provider readiness, the costs, risks and benefits of adoption, and the governance, standards and safeguards required for a trusted Digital VAT ecosystem.
The consultation deadline is 16 October 2026.
