Tax experts are warning South Africans that a delayed VAT refund may be worth more than the amount that lands in their bank account.
Image: Timothy Bernard / Independent Newspapers
Tax experts are warning South Africans that a delayed VAT refund may be worth more than the amount that lands in their bank account.
According to Nico Theron, founder of Unicus Tax Specialists SA, many taxpayers assume a refund is final once the money hits their account, but interest on late payments is often missing.
“Many taxpayers believe the issue is resolved once the refund is finally released,” Theron said..
“That is not necessarily the case. A delayed refund should always prompt a follow-up question. Did SARS also pay the interest due?”
Theron revealed that in a recent case, a taxpayer had to pursue SARS for months to recover R2.8 million in interest after it was initially omitted from a delayed VAT refund.
“If the taxpayer had not queried the omission, requested the calculation, and challenged SARS position, a substantial amount of statutory interest may never have been paid.”
He explained that VAT refunds are often selected for verification, which can delay payments, but such delays do not remove a taxpayer’s right to interest under the VAT Act.
Theron also said 'that many taxpayers focus solely on securing the release of a delayed refund, particularly where cash flow pressures are involved. However, this approach may result in additional amounts being overlooked".
“In practice, VAT vendors should review their statements of account once a delayed refund is paid. They should confirm whether interest has been calculated, whether the correct period has been applied, and whether SARS has relied on any statutory exception to reduce or avoid paying interest.”
“Interest on delayed VAT refunds is not discretionary.Where the legal requirements are met, it forms part of the taxpayer’s entitlement. But that entitlement must be understood and, where necessary, enforced.”
He also said that the case raises a broader concern about how many taxpayers may be unaware of interest owed to them.
“VAT refund delays occur regularly. The real question is how many taxpayers receive their refunds and never verify whether interest was also paid. In this matter, the interest exceeded R2.8 million. That should serve as a wake-up call.”
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