SARS VAT modernisation plans in a nutshell…
The current VAT system in South Africa relies largely on self-reporting. What this means is that SARS has very little visibility into the true VAT supply chain and must therefore spend a lot of additional time and resources to ensure that supplied VAT returns are accurate.
But this inconvenience is not just a SARS problem – it also pushes significant costs onto SA vendors in the form of complex compliance procedures, time-consuming (and often unnecessary) audits, delayed processing of VAT refunds and tedious, manual processes.
SARS intends to digitise and automate the VAT reporting process, with the end goal being to receive digitally transmitted VAT data in real-time (or near real-time). In other words, rather than receiving an aggregated return every 2 months or so, vendor transaction data will be automatically pushed to SARS as it arises from the vendor’s accounting system.
The details of SARS VAT Modernisation objectives can be found in its recently published discussion paper.
How does SARS intend to make this a reality? Cue e-invoicing
Although SARS may, as an interim phase, introduce an updated and more detailed, modernised VAT return with more disclosure fields, it recognises that to achieve its ultimate modernisation goal, real-time digital data transmission models would need to be put into effect. This is where e-invoicing comes in…



What is e-invoicing and how does it achieve real-time data transmission?
In short, an e-invoice is a digital document or invoice that is transmitted directly from the sender's system to the recipient’s system and, due to its underlying data format, can be automatically processed by said recipient’s system.
An e-invoice is NOT a PDF or any other digital format that requires human intervention to be captured. It must have a structured, data format (often an XML file) that can be automatically processed and understood by both parties’ systems.
When it comes to data transmission to SARS, the idea is that vendors can generate an e-invoice for each transaction they raise in their accounting system, with these e-invoices being automatically transmitted to SARS on a daily, six-hourly, or even hourly basis. Businesses can even decide to update their own billing systems by sending e-invoices to their clients, which can lead to a whole host of billing, Accounts Receivable and Accounts Payable automation benefits.
Refer to the FAQ below to find out more about how e-invoicing can be used to your own business’s benefit, enhance cashflow, reduce DSO and improve overall customer experience.
FAQ
E-invoicing refers to the process of sending invoice (and other document) information electronically, in a structured data format (e.g. XML), allowing it to be automatically sent, captured, processed, and stored by both the sender's and recipient's systems without requiring any human intervention.
No. Simply having a digital format or having the ability to be sent out electronically does not necessarily qualify a document as an e-invoice.
Instead, it is an e-invoice’s underlying data structure and ability to be processed automatically that differentiates it from more traditional document formats such as paper or PDF. Unlike e-invoices, both paper and PDF require manual intervention at some stage in the processing cycle. For example, while PDFs are sent out electronically, the recipient will need to capture and archive its information manually (or via error-prone OCR processes). As a result, PDFs do not qualify as e-invoices.
In order to enhance its visibility over South Africa’s VAT supply chain and improve reporting accuracy, SARS is looking into setting up infrastructure to accommodate the “digital transmission of VAT data” in near real-time, with data transmission from vendors’ systems aimed to take place on an hourly basis.
To comply with the above, businesses will need to have systems in place that facilitate the regular preparation and transmission of document data such that the data is ready for transmission soon after said documents are issued, while not interfering with day-to-day business activities nor requiring a significant resource investment.
With an e-invoicing solution, businesses can raise documents in their accounting systems as normal. The data underlying these documents can then be generated automatically in the required format via the e-invoicing solution. The solution would then facilitate the automatic transmission of this data to SARS via its built-in, secure data transfer server.
While the observed, global shift towards e-invoicing can be attributed partly to new regulations, many businesses choose to adopt e-invoicing due its efficiency, accuracy, savings and automation benefits. The main benefits of e-invoicing include:
- Reduced DSO and enhanced cashflow due to faster invoice processing times
- Reduced client disputes and processing costs
- Faster invoice and statement distribution
- Automated linking of source documentation
- Enhanced audit trails and document tracking
- Improved customer relationships
- Improved data security
- Simplified cross-border transactions
For more details about the business benefits of e-invoicing and its role in enhancing cashflow and supply management processes, check out this post by leading South African e-invoicing solutions expert, System1A.
Setup and onboarding times will depend on the e-invoicing software selected and its ability to integrate with your ERP or accounting system. It is important to take the setup and onboarding period into account to ensure that teams have sufficient time to become used to their chosen e-invoicing solution and ensure it’s properly integrated with their existing stack - all before VAT modernisation laws come into effect.
While it is theoretically possible to facilitate the transmission of document data in-house, this will require dedicated resources to ensure data is structured according to SARS’s requirements. This will also likely require dedicated IT resources and budget to set up and manage a data transmission server. Due to the administratively intense and costly nature of these processes, it is often more cost-effective to go with a dedicated e-invoicing and data transmission solution that simply bolts on to your existing IT stack.
In addition to the increased cost and time burden, there is also a increased risk of error and non-compliance with in-house solutions. For these reasons, as has been observed overseas, many businesses prefer to entrust the preparation and transmission of document data to a dedicated e-invoicing expert whose role is to keep up to date with a tax body’s specific requirements and ensure full compliance throughout.
To learn what to consider when investigating an e-invoicing solution for business, visit our e-invoicing solutions page.