Big VAT Changes Coming to South Africa: What the SARS Modernisation Project Means for Businesses and Consumers

South Africa's tax landscape is evolving rapidly, and one of the most significant shifts on the horizon is the SARS VAT Modernisation Project. As reported in a recent article from Daily Investor (published 26 January 2026), SARS is pushing forward with a major overhaul of its value-added tax (VAT) systems. This initiative promises real-time data access, e-invoicing, and greater transparency—without increasing the standard VAT rate.

Understanding the VAT Modernisation Project

The project, first outlined in tax draft proposals back in 2023, aims to modernise SARS's outdated systems. It will enable the revenue service to receive real-time data on VAT collections directly from businesses' accounting systems. Key features include:

• Mandatory e-invoicing for VAT-registered vendors
• Automated data flows and validation of VAT numbers
• Near-instant transmission of invoice details to SARS

According to the Daily Investor article, a phased rollout is expected to start in 2026, with full implementation targeted for 2028. This builds on global examples like Chile, where similar digital VAT monitoring slashed the VAT gap significantly.

The primary goal? To close South Africa's estimated R800 billion tax gap—the difference between taxes assessed and actually collected—without hiking the VAT rate (which remains at 15% following reversals of earlier proposed increases in 2025). Instead of rate hikes, SARS is focusing on better compliance through technology.

Why This Matters for South African Businesses

For VAT vendors (anyone registered or required to register for VAT, typically those with turnover over R1 million), this shift represents a fundamental change in compliance:

• Enhanced transparency: SARS will gain earlier visibility into transactions, often before businesses file returns. This means discrepancies (e.g., mismatched invoices, VAT declarations, or bank data) could be flagged almost immediately.
• Reduced admin for compliant businesses: Faster verifications, fewer manual document requests, and streamlined processes could ease burdens for those with solid systems.
• Higher risks for non-compliance: As SAIT deputy CEO Keitumetse Sesana noted in the article: "Every invoice, credit note, and adjustment entered into financial systems must be correct from the outset. VAT numbers must be validated in real time." Errors could trigger stricter penalties with less room for correction.

Businesses will need to upgrade accounting software, ensure real-time VAT validation, and prepare for automated data submission. Deloitte's Tax Technology team highlighted that the biggest change happens inside businesses—compliance becomes a "systems issue" at the point of data creation.

Impact on Consumers and the Broader Economy

While the project targets business compliance rather than direct consumer changes, the benefits could trickle down:

• Improved SARS efficiency may lead to more stable revenue collection, potentially reducing pressure for future rate increases.
• Better fraud detection could indirectly benefit honest taxpayers through fairer systems.
• No mention of changes to zero-rated items (like basic foodstuffs, which remain zero-rated at 0% VAT) or exemptions in this modernisation push—focus is on process, not rates or scope.

However, small businesses and those with outdated systems may face upfront costs to adapt.

Preparing for the Changes

With the phased rollout kicking off this year (2026), now is the time to act:

1. Review your accounting and invoicing software for e-invoicing compatibility.
2. Implement real-time VAT number validation.
3. Train staff on accurate invoicing and data integrity.
4. Stay updated via official SARS channels (e.g., their VAT guides and newsletters).