Mandatory VAT Apportionment Reporting To SARS

The South African Revenue Service ("SARS") published Binding General Ruling 16 (BGR16) (Issue 3) on 27 November 2023, which replaced the previous Issue 2 and which sets out the standard turnover-based ("STB") method for determining a vendor's annual apportionment ratio.

Issue 3 applies to all financial years commencing on or after 1 January 2024 and contains several exclusions and adjustments to take into account as part of a vendor's apportionment calculations, as well as a key – although somewhat hidden – compliance obligation which vendors must not overlook.

Annual true-up adjustment

Vendors using the previous financial year's turnover to calculate the current year's apportionment ratio, must make a 'true-up' adjustment, reflecting the difference between the two ratio's within nine months after their financial year-end (being the month 8 VAT return, to be filed by the end of month 9).

Vendors with a financial year ending on 31 December 2024 will be the first to apply the true-up adjustment under the new Issue 3 of BGR16. The true-up adjustment must be included in their August 2025 VAT return, which is due to be filed on or before the last business day of September (for vendors registered on e-filing).

Mandatory reporting to SARS

Issue 3 contains a requirement, in note 8, that vendors must submit certain required information to SARS at the same time when their annual true-up adjustment is reflected in their VAT returns.

This submission must be made to SARS by email at the address specified in Issue 3, and must include the following required information, namely:

• the vendor's registered name;
• the vendor's VAT registration number;
• the apportionment method and formula applied; and
• the apportionment ratio (percentage) for the year.

When applying the Issue 3 formula for the first time, vendors must submit their apportionment method and ratios for each of the preceding three years. For example, if a vendor with a December 2024 year-end first applies Issue 3 during its 2024 financial year, it will be required to provide the required information for its 2024 financial year to SARS during September 2025, together with the apportionment formula(s) and ratios for each of its preceding three financial years from 2021 to 2023.

Complexities may arise from the new adjustments and exclusions introduced by Issue 3. Vendors are advised to contact a specialist tax practitioner to assist with the preparation of apportionment calculations and related true-up adjustments, as well as the required reporting to SARS in this regard.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.