VAT Apportionment: An Unintended Penalty?

The stated policy of the South African Revenue Service (SARS) not to make value-added tax (VAT) apportionment rulings effective retrospectively to prior financial years has been questioned on several occasions. The matter was recently considered by the Tax Court in the case of Taxpayer v Commissioner for the South African Revenue Service (VAT2063) [2019] ZATC 2 (15 November 2019) where the Tax Court found in favour of SARS.

The taxpayer in this case provides money-transfer services within Africa, mobile phone credit and bureau de change services. The taxpayer therefore makes both taxable and exempt supplies for VAT purposes and is thus required to apportion the VAT it incurs on its expenses between taxable and exempt supplies.