Why improvements to export VAT rules matter

South Africa, as a key player in the global economy and the gateway to African markets, has a well-established import and export framework. However, longstanding ambiguities and interpretational gaps in the law continue to create uncertainty for vendors and foreign purchasers. Even where supplies should genuinely qualify for zero rating, any misapplication of the export value-added tax (VAT) rules exposes vendors to protracted verification processes, unnecessary audit disputes and assessment by the South African Revenue Service (SARS). This makes the upcoming 2026 Budget an opportune moment to address these challenges with a clear strategy focused on reducing procedural inconsistencies. The key benefits would be much needed clarity for vendors and foreign purchasers to navigate export compliance obstacles while easing the administrative pressures faced by SARS.

The article explores the nature of these challenges and what practical legislative changes or improvements can provide meaningful relief to those engaged in exports.

“Exporter” disconnect between customs and VAT

The export of goods from South Africa is subject to the zero rate of VAT provided that certain requirements are met. In the case of an indirect export of goods, the qualifying purchaser is responsible for exporting the goods from South Africa and the requirements as set out in the VAT Export Regulation (published in Government Gazette 37580 on 2 May 2014) must be adhered to.  

One of these documentary requirements is to retain the export customs documentation.

But who should be regarded as the exporter on it?

• In the SARS VAT Connect Issue 13 (November 2021), the revenue authority states that it is the qualifying purchaser that must be registered as an exporter and listed as such on the SAD 500 to comply with the provisions of the Customs and Excise Act.
• The VAT Export Regulations do not specifically mention this requirement, but do require the qualifying purchaser to register as an exporter.
• An “exporter” as defined in the Customs and Excise Act includes, among other things, a person who at the time of exportation either owns the goods exported or is beneficially interested in the goods exported.

Therefore, arguably the supplying vendor who has an interest in the goods could reasonably be listed as the “exporter” on the SAD 500 based on the customs definition. A disconnect has evolved between what is regulated in law, provided as guidance and the commercial reality of the supply between the seller and purchaser.

Following SARS’ guidance, including the comments in the VAT Connect, where indirect exports take place, the foreign purchaser (Qualifying Purchaser) should be registered as an exporter and should be reflected on the SAD 500 as the exporter. Practically, though, where suppliers are audited by SARS, these SAD 500s are queried by SARS auditors. It is important that the current VAT Export Regulation is amended to provide clarity for both suppliers and foreign purchasers. This is needed to encourage foreign trade.

Inconsistency in payment requirements for exports

Section 11(3) of the VAT Act is supported by two Interpretation Notes issued by SARS, namely Interpretation Note 30 (Issue 3)(IN30) and Interpretation Note 31 (Issue 4)(IN31) which provide the documentary proof required to substantiate the zero rate.

The exceptions which are in substance concessions and detailed in IN30, should similarly apply to zero rated supplies governed by IN31. Introducing similar exceptions and concessions to IN31 would provide consistency, clarity and indeed parity in the compliance requirements for zero-rated supplies.   

Goods sold which never enter nor exit South African borders

Where a South African vendor sells goods to an export customer, and the goods are shipped from outside South Africa to an export country, these transactions would need to adhere to the generally accepted documentation prescribed in IN30.

These goods, however, never enter or exit South Africa’s borders so no South African export customs documents will be available. This means that the South African vendor is missing part of the documents needed as proof, despite the economic substance of the supply genuinely qualifying for the zero rate.

Under destination-based principles, VAT should be borne where goods and services are consumed. It follows that IN30 should provide clear guidance on the proof required to support the sale of goods that never enter nor exit South Africa.

Conclusion

In an increasingly complex global trade environment, addressing challenges with the export VAT rules will allow vendors to operate more confidently. The upcoming budget speech therefore presents a platform to extend certainty in this space, support vendors with export compliance and pave the way for sustainable economic growth.