{"id":870858,"date":"2026-08-19T15:00:00","date_gmt":"2026-08-19T13:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=870858"},"modified":"2026-08-19T14:48:54","modified_gmt":"2026-08-19T12:48:54","slug":"sars-nails-businesses-in-new-vat-ruling","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/870858\/sars-nails-businesses-in-new-vat-ruling\/","title":{"rendered":"SARS nails taxpayer in new VAT ruling"},"content":{"rendered":"\n

A recent court ruling in favour of SARS related to tax apportionment could have far-reaching consequences for South African corporate taxpayers.<\/p>\n\n\n\n

The ruling was issued by South Africa’s tax court after the taxpayer, a financial services provider (FSP), appealed SARS’s decision to deny its request for a transaction-based apportionment methodology.<\/p>\n\n\n\n

The apportionment methodology relates to the way in which a business calculates how much VAT is owed to SARS when it buys supplies for both taxable and tax-exempt purposes.<\/p>\n\n\n\n

In a case where a business has expenses for both taxable and non-taxable purposes, an apportionment method is used to determine how much tax is due.<\/p>\n\n\n\n

The general method used is a Standard Turnover-Based (STB) method, which divides taxable supplies by the combined total of taxable and non-taxable goods and other income.<\/p>\n\n\n\n

Other apportionment methods can be used, but they must be approved by SARS, and the taxpayer must show why the alternative method is appropriate.<\/p>\n\n\n\n

In the latest court ruling, the FSP taxpayer approached SARS to request the use of a transaction-count apportionment method.<\/p>\n\n\n\n

The taxpayer had previously used this method and requested permission to continue with the previously approved apportionment methodology.<\/p>\n\n\n\n

SARS denied this request and said the FSP must use a varied turnover-based method, with the transaction-count methodology used only for IT infrastructure costs.<\/p>\n\n\n\n

SARS argued that it could not approve the use of a transaction-count method because the business had expanded its functions since the last approval.<\/p>\n\n\n\n

Specifically, the FSP had moved into the transactional banking market since the last apportionment method had been approved.<\/p>\n\n\n\n

The taxpayer then approached South Africa’s tax court to appeal the decision\u2014but the court upheld the methods imposed by SARS.<\/p>\n\n\n\n

The decision had a significant impact on the business. While the proposed method yielded a ratio close to 80%, the mixed apportionment yielded approximately 40%.<\/p>\n\n\n\n

The impact on businesses<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Accounting firm PricewaterhouseCoopers (PwC) explained that the ruling against the FSP shows that businesses have an obligation to provide empirical evidence supporting different apportionment methods.<\/p>\n\n\n\n

The firm said the judgment highlights that an apportionment method must fairly reflect how mixed expenses are used, and that the business has the onus to prove this.<\/p>\n\n\n\n

“The vendor, not SARS, bears the onus of proving it, on clear, reliable, and auditable evidence,” the firm said.<\/p>\n\n\n\n

According to the Tax Administration Act, a business must prove that a proposed apportionment method is both fair and reasonable on the balance of probabilities.<\/p>\n\n\n\n

In the recent case where the business lost the appeal, PwC said the FSP did not have enough evidence to back its proposed methodologies.<\/p>\n\n\n\n

“It led to no empirical evidence, no cost analysis and no study of resource allocation or auditable data,” it said.<\/p>\n\n\n\n

The firm said that transaction-based apportionment methods could be vulnerable in the future because they rely on subjective decisions.<\/p>\n\n\n\n

“Methods driven by transaction counts may be vulnerable where exempt activities remain the main economic driver of the business,” it said.<\/p>\n\n\n\n

“Turnover is drawn from audited records, whereas transaction counts rest on subjective choices.”<\/p>\n\n\n\n

PwC said that in the future, businesses should be prepared for more work when requesting a different apportionment method.<\/p>\n\n\n\n

“Materially more work may be needed with management, finance teams, and advisers to build the factual record, cost analysis, and support required to persuade SARS and, if necessary, a court,” the firm said.<\/p>\n\n\n\n

“The case highlights that a method will not be accepted simply because it gives a higher VAT recovery. It must be fair, reasonable, and supported by facts.”<\/p>\n\n\n\n

“This decision has immediate relevance for vendors in the financial services industry and could impact other vendors that are using or considering applying for a specific apportionment method.”<\/p>\n","protected":false},"excerpt":{"rendered":"

A recent court ruling in favour of SARS could make it harder for businesses to request different apportionment methods.<\/p>\n","protected":false},"author":131,"featured_media":862885,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"posted","_sma_x_autopost_error":"","_sma_x_post_id":"2090061490141171934","_sma_facebook_post_id":"191437357620492_2180730809413985","_sma_instagram_post_id":"17929194834384028","_sma_x_attempts":1,"footnotes":""},"categories":[9872],"tags":[26216,2407,3246,7438],"class_list":["post-870858","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-apportionment","tag-pwc","tag-sars","tag-vat"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/870858","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/131"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=870858"}],"version-history":[{"count":14,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/870858\/revisions"}],"predecessor-version":[{"id":870959,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/870858\/revisions\/870959"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/862885"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=870858"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=870858"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=870858"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}