According to recent media reports, Sars has launched a new initiative — Project AmaBillions — as part of its broader strategy to boost revenue collection by an additional R70-billion over the next three years.

To support this objective, Sars has reportedly already recruited 500 new staff, with a further 1 000 to 1 500 appointments anticipated. While this expanded capacity will enhance Sars’ ability to collect, across multiple tax types, Value-Added Tax (VAT) remains an easy target, with a notable increase in VAT-related audits, verifications, and additional assessments already being observed.

In this evolving compliance landscape, businesses — particularly those operating in complex or high-risk sectors — are encouraged to revisit their VAT positions and ensure that both legal interpretation and supporting documentation are up to standard.

VAT as an Easy Win for Sars 

Government’s recent proposal to raise the VAT rate met significant public resistance and was ultimately shelved. However, the fiscal demands that prompted the proposal remain unchanged. In the absence of a rate increase, an easy target is the enhanced enforcement of existing VAT obligations as a more immediate mechanism to protect the tax base.

Given the transactional nature and extensive reach of VAT, it remains one of the most active areas of Sars enforcement, and from a tax collection standpoint, is second to only Personal Income Tax, per Sars’ Revenue Announcement for the 2024/25 Financial Year:

Except from the 2024/25 Revenue Announcement presentation

Recent trends confirm an increase in audit activity, particularly where VAT positions rely on complex interpretation or are not fully substantiated by documentation.

Certain areas are particularly at risk:

• Input tax deductions, where Sars may challenge the deductibility based on the nature of the underlying expense, its link to taxable supplies, or the quality of supporting invoices;
• Zero-rated supplies, especially exports, where documentary proof and timing requirements are closely examined; and
• Apportionment calculations, in cases where businesses make both taxable and exempt supplies and Sars queries the method used to determine the deductible portion of input VAT.

In addition to heightened audit activity, input tax deductions have increasingly become the subject of legal proceedings, with courts asked to assess whether deductions meet the requirements of the VAT Act. 

Often, the success or failure of a claim rests both on the commercial reality of the transaction, and on whether the taxpayer can demonstrate compliance with the relevant documentary and legal criteria. 

Discharging the Burden of Proof

As a self-assessment system, VAT places the burden of proof squarely on the taxpayer. Sars does not need to prove a taxpayer is incorrect; rather, it is the taxpayer who must prove that the tax position adopted is correct.

Documentary shortcomings that can result in adverse audit findings may include:

• Incomplete or non-compliant tax invoices;
• Missing or outdated export documentation;
• Contracts or agreements that do not support the VAT treatment applied; and
• A lack of internal policies governing apportionment or exempt supply treatment.

Even businesses with reputable systems or historic Sars engagements should not assume automatic compliance. Audit readiness requires continuous alignment with Sars’ current expectations and the evolving interpretation of the VAT Act.

High-Risk for High Reward: Which Businesses are Most Scrutinised?

While all VAT-registered vendors are subject to review, recent enforcement trends suggest that the following types of businesses may be more susceptible to VAT scrutiny, especially in light of the looming “Project AmaBillions”:

• Exporters of goods and services, particularly where zero-rating is applied;
• Foreign suppliers of electronic or remote services to South African recipients;
• Property developers and investors, due to the complexity of VAT on construction, disposals, and mixed-use properties; and
• Enterprises with substantial input tax deductions or recurring VAT refunds.

In these cases, a proactive review of VAT compliance, and risk report, may assist in identifying and addressing potential exposure, before they are raised by Sars.

A Coordinated Tax Debt Collection Strategy

“Project AmaBillions” is more than a revenue slogan — it reflects a deliberate shift by Sars toward coordinated and data-driven enforcement, leading to increased tax revenue collections. This includes the use of Artificial Intelligence tools, targeted audit selection based on risk modelling, and specialised teams focused on high-yield areas such as VAT, High-Net Worth taxpayers, and Cryptocurrency.

With the recruitment of up to 1 500 additional staff, Sars is positioned to expand its enforcement reach significantly over the coming months.

Proactive Compliance Is Key

While increased audit activity may place pressure on internal finance and tax teams, early intervention and strategic review can help businesses avoid prolonged disputes or unintended liabilities. A targeted VAT review can assist in confirming that:

• Zero-rated supplies are supported by adequate and compliant documentation;
• Input tax deductions meet all legal and documentary requirements;
• Invoicing and contractual frameworks comply with Sars standards; and
• Internal VAT procedures, including apportionment and record-keeping, are robust.

Early Action Prevents Future Exposure

Where there is uncertainty around VAT treatment, and businesses find themselves in a potentially precarious position of now facing Sars scrutiny, the best practice is to seek the assistance of a tax professional, ensuring the best compliance strategy is followed. Early assessment can help prevent future challenges, reduce the risk of penalties and interest, and ensure Sars readiness in an increasingly vigilant digitised environment.

However, in instances where a taxpayer has already undertaken preliminary disclosures themselves, and a subsequent audit ensues, enlisting seasoned tax attorneys is essential to help navigate the complex nuances of tax legislation. Not only will the legal approach serve to optimise a taxpayer’s compliance, but also provide guaranteed legal privilege, thus mitigating risk of prosecution and penalties.

Written by Micaela Paschini, Team Lead: Tax Legal at Tax Consulting SA