The South African Revenue Service (SARS) has secured a Constitutional Court ruling
Image: Timothy Bernard Independent Newspapers
The South African Revenue Service (SARS) has secured a Constitutional Court ruling confirming that recycled or previously manufactured gold does not qualify for VAT zero-rating.
This followed a dispute involving Lueven Metals (Pty) Ltd, a gold refiner, which supplied refined gold bars to a registered bank and treated the sales as VAT zero-rated.
The revenue service disputed this, arguing that the gold originated from previously manufactured items such as jewellery and therefore did not meet the requirements set out in the Value-Added Tax Act.
The High Court ruled in favour of SARS, and the Constitutional Court has now unanimously upheld that decision.
"This ruling provides clear legal guidance, puts an end to aggressive VAT interpretations, and reinforces SARS’ commitment to enforcing tax law in a principled manner. This judgement aims to protect the tax base and safeguard revenue for the benefit of all South Africans".
SARS said the judgment clarifies that gold supplied to prescribed purchasers can only be zero-rated if it meets specific requirements set out in the VAT Act.
The revenue service said the ruling provides certainty for the gold refining and banking sectors and confirms that recycled gold remains subject to VAT at the standard rate.
“This judgment reaffirms a foundational principle of our constitutional democracy: that legislation must be applied as written, consistently, and fairly.
The Constitutional Court has provided unequivocal clarity, and that certainty benefits vendors, financial institutions, the precious metal industry regarding the VAT treatment of gold supplied under section 11(1)(f).” SARS Commissioner Dr Johnstone Makhubu said.
Makhubu added that the ruling removes uncertainty around the VAT treatment of gold transactions and supports voluntary compliance .
“Voluntary compliance is built on trust, and trust depends on certainty. This ruling removes ambiguity as it reinforces that when taxpayers know precisely where the law stands, they can comply with confidence"
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