Case No: VAT 32679 – VAT Reactivation, Liability Dates and the Interpretation of SARS Correspondence
Case No: VAT 32679 – VAT Reactivation, Liability Dates and the Interpretation of SARS Correspondence
By Seelan Muthayan, Partner
Introduction
The Tax Court judgment in Case No: VAT 32679, delivered on 18 December 2025, considers a dispute between a taxpayer and the Commissioner for the South African Revenue Service (SARS) regarding the effective date of VAT registration following a reactivation. The case provides important guidance on how ambiguous SARS correspondence should be interpreted and the consequences such ambiguity may have for VAT assessments.
The taxpayer had previously been registered as a VAT vendor but became dormant and was deregistered during 2010. In 2017, the taxpayer resumed trading after successfully bidding for a municipal tender valued at approximately R60 million, with services commencing in February 2018.
During January 2018, the taxpayer contended that it submitted a VAT101 application reflecting 1 February 2018 as its VAT liability date, although SARS disputed receipt of this application. A further VAT101 was submitted in June 2018, again reflecting a VAT liability date of 1 February 2018. On 28 June 2018, SARS issued a letter approving the taxpayer’s request for VAT reactivation, but the letter did not specify the effective date of reactivation.
The Issue Before the Court
The central issue before the Tax Court was whether the taxpayer should be treated as a VAT vendor from 1 February 2018, as contended by SARS, or from 28 June 2018, being the date of the reactivation letter, as contended by the taxpayer. This determination had a direct impact on the validity of the additional VAT assessments raised by SARS for the 2018 tax periods.
Interpretation of the Reactivation Letter
The Court found that the reactivation letter issued by SARS was ambiguous, as it approved the request for reactivation but failed to state the date from which the reactivation was effective. The letter was capable of more than one interpretation: either that reactivation took effect on the date of the letter, or that it applied retrospectively from an earlier VAT liability date.
Importantly, the Court accepted that the taxpayer bona fide interpreted the letter as confirming VAT registration with effect from 28 June 2018, and that this interpretation was reasonable in the circumstances. The Court emphasised that where SARS determines a VAT registration date under section 23(4)(a) of the VAT Act, that date must be clearly and adequately communicated to the taxpayer.
SARS’s Audit Approach
During a VAT audit conducted in 2020, SARS assessed the taxpayer on the basis that it was a VAT vendor from 1 February 2018, relying on internal system data rather than the wording of the reactivation letter. This resulted in additional VAT assessments for the period February to July 2018, together with understatement penalties.
The Court found that the auditor failed to properly consider the legal effect of the reactivation letter and instead implemented the VAT registration date reflected on SARS’s internal systems.
The Court’s Findings
The Tax Court held that:
- The reactivation letter did not clearly communicate a retrospective VAT registration date.
- The taxpayer’s interpretation that VAT registration was effective from 28 June 2018 was reasonable and bona fide.
- SARS ought to have audited and assessed the taxpayer on the basis that it was a VAT vendor from 28 June 2018, and not from 1 February 2018.
The Court did not set aside the assessments outright. Instead, the matter was referred back to SARS for reconsideration and reassessment based on the correct VAT registration date. Penalties and interest were likewise required to be reconsidered. No order as to costs was made.
Key Takeaways
This judgment highlights several important principles for VAT vendors:
- SARS correspondence affecting VAT registration or reactivation must clearly state the effective date.
- Where SARS communication is ambiguous, a reasonable and bona fide taxpayer interpretation may prevail.
- VAT audits must have due regard to what SARS has communicated to the taxpayer, and not rely solely on internal system records.
Conclusion
Case No: VAT 32679 underscores the importance of clarity and precision in SARS communications and confirms that taxpayers should not be prejudiced by ambiguity in official correspondence. The judgment serves as a reminder that VAT liability dates must be properly determined and clearly communicated, failing which SARS may be required to reassess VAT liabilities on a basis more favourable to the taxpayer.