How to claim VAT refunds in South Africa: A guide for tourists, foreign enterprises and vendors

South African Revenue System (SARS) introduced an advanced VAT refund process. The mechanism of VAT refund is straightforward. When a purchaser gets exported products in hand, he or she can submit a claim for VAT refunds. In this scenario, the purchaser and the purchased items must qualify for the VAT returns.
The VAT refund mechanism only applies when you purchase a product. You can not claim VAT on the acquisition of services. Tourists and foreign individuals residing in South Africa or other countries must pay 15% VAT if they exchange products in South Africa. Under section 1 of VAT Act No. 89 of 1991, any vendor can claim a VAT refund if they meet certain regulations. If you claim refunds on registrable goods or second-hand items, you need to follow some special rules.

How do I claim VAT refunds?

• Step 1: If you are a tourist, ask for a tax invoice from the shop attendant whenever you acquire any goods. You need to submit a tax invoice at the time of submitting claims.
• Step 2: You need to present all the necessary documents to SARS. The documents need to be endorsed by customs agents or VRA agents. For a vendor, the annual VAT returns must be submitted as per the VAT Act.
• Step 3: SARS usually takes 21 days to process all the documents along with the bank details. When the validation process is completed, the VAT amount will be transferred to your bank account within 72 hours.

The required documentation for VAT refunds

1. For foreign nationals and tourists, a valid passport must be submitted. Make sure the passport has a valid entry stamp. Otherwise, you will be disqualified to submit a claim.
2. Individuals must have a valid tax invoice. This invoice contains the vendor’s name and a valid VAT registration number. A business must go through the VAT registration process if it does not have a VAT registration number.
3. The invoice must have certain words intact. These words are “Invoice”, “Tax Invoice” and “VAT invoice”. This is done to prevent a vendor from fraudulent acts.
4. A brief description of the products is required. This is the same for both new and second-hand products.
5. The prices of the purchased items must be listed. Ensure you have not made any miscalculations.
6. If the price of the goods including VAT exceeds R5000, you must provide your address and the exact quantity of the goods you purchased.
7. The required documents must be submitted to the VAT refund agency (VRA) within 90 days from the export date.

Who is eligible for VAT refunds?

• An individual who does not hold a South African passport and operates in other countries can submit a VAT refund claim if he or she exports goods from South Africa.
• A non-South African who makes temporary visits to South Africa is eligible for a refund. He must have a permanent residential ID of their country at the time of purchasing products in South Africa.
• Foreign diplomats working in South Africa can claim a refund for the movable goods they purchased at the time of departing the country.
• International welfare organizations that export movable goods for humanity, peace, or to develop a country’s socio-economic standards can make VAT refund claims.

When VAT refunds will be considered

A VAT refund will be considered by SARS in South Africa when a vendor pays input tax for any
goods or services more than the output tax of that specific goods or services for a tax period. In
simple terms, if the vendor does any erroneous overpayment of tax then the overpaid tax amount will be refunded to the vendor. South African Revenue System, also known as SARS, will refund the overpaid amount as a VAT refund within 21 days. This process can be delayed for the following reasons:

• Incomplete documentation
• Error in your bank details
• Outstanding VAT return
• Pending audit of verification

Interest on late payments of Refund

If you are eligible for a VAT refund as we discussed earlier then as per Section 45 of the VAT act. SARS will refund the overpaid tax amount as a VAT refund in 21 days. If there are any delays made by SARS, an interest rate of 10.5% per annum will apply to the total amount from March 2023. Also, there is a condition you need to know before you expect the interest rate on a delayed VAT refund. Interest rate earning on delayed VAT refunds will not be applicable if a delayed process occurs for incomplete documents, bank details mismatch, or outstanding VAT return.

Final words

As per the latest SARS report in the financial year 2023/2024 VAT refunds have hit an unprecedented amount of R342.9 billion. Businesses are protected by the strong laws of South Africa. So, you need not worry about the refunds also you will earn interest on the amount if there is a delayed payment over 21 days. As per reports, there are so many cases of delayed payment for the error that occurred from the vendor side so it is always recommended to take consultation from tax attorneys. If delays continue from SARS it will help you to file VAT with complete and error-free documents.