Written by Nonkululeko Manana, MaxProf Auditor

Is the refund actually delayed by SARS — or is the business’s record-keeping contributing to the delay?

Why does SARS verify VAT refunds?

A VAT refund arises where a vendor’s allowable input tax exceeds its output tax for a tax period, or where the vendor has made an erroneous overpayment of VAT. SARS explains that a refund may be subject to verification, inspection or audit before it is released.

This process is intended to establish whether the amount claimed is correct and properly supported. A refund being selected for verification does not, by itself, mean that the vendor has acted incorrectly. It does, however, mean that the vendor should be able to substantiate the figures reported on its VAT201 with reliable accounting records and supporting documentation.

The practical issue for businesses is therefore not simply whether a refund has been claimed, but whether the claim can be traced from the VAT201 to the underlying transaction and source documentation.

What commonly causes VAT refund delays?

There are several circumstances that can affect the timing or amount of a VAT refund.

1. Verification, inspection or audit

A VAT refund may be selected for verification, inspection or audit. SARS may request supporting documentation and may withhold the refund until the relevant process has been finalised, unless acceptable security is provided.

A vendor that can respond accurately and completely to a SARS request is generally better placed to resolve the verification efficiently. The quality of the response often depends on the quality of the VAT reconciliation and audit trail maintained before the refund was claimed.

2. Incomplete or defective VAT returns

Errors or omissions on the VAT201 can affect the refund process. SARS may withhold a refund where it is not satisfied that a defect or incompleteness does not affect the amount refundable, or until the defect has been corrected.

3. Missing supporting documentation

A significant practical risk arises where a business claims substantial input tax but cannot produce the documentation supporting the claim.

For example, a business may record a large equipment purchase and claim the related input tax. If SARS requests the tax invoice and supporting accounting records and the business cannot locate them, the vendor may struggle to substantiate the deduction.

The tax invoice is particularly important because SARS identifies it as a key document supporting an input tax deduction. Other documentation may also be relevant depending on the transaction.

4. Differences between accounting records and the VAT201

A VAT return should not exist in isolation from the business’s accounting records. Differences between the VAT control account, general ledger, supplier records, sales records and VAT201 may raise questions about the accuracy of the refund claim.

A strong VAT reconciliation should explain the movement from the accounting records to the amounts ultimately declared on the VAT201, including reconciling items and unusual transactions.

5. Banking details and outstanding returns

Incorrect or unverified banking details can affect the payment of a refund. SARS may also withhold a refund until outstanding VAT returns have been submitted.

This means that a vendor can have a valid VAT credit while still experiencing a delay in receiving the amount into its bank account.

6. Outstanding tax debt

A VAT refund should be considered in the context of the vendor’s overall SARS position. Where a vendor has outstanding tax debt, SARS may apply debt equalisation or set-off against the refundable amount before releasing any remaining balance.

For example, if a business has a R200,000 VAT refund and owes R80,000 in PAYE, the refund may be applied against the outstanding debt, leaving a balance of R120,000, subject to the applicable SARS processes.

The key point is that a VAT credit does not necessarily translate into an equivalent cash payment where other amounts are outstanding to SARS.

What supporting documents should a business have ready?

There is no single checklist that applies identically to every VAT refund verification. SARS will specify the information required in the relevant request. However, a well-maintained VAT file should allow the business to trace its VAT figures back to the underlying transactions.

• Tax invoices for purchases on which input tax was claimed
• Tax invoices issued to customers, where relevant
• Credit and debit notes
• Bank statements and proof of payment, where relevant
• General ledger and VAT control account
• VAT reconciliations
• Sales and purchase reports
• Import documentation and bills of entry, where applicable
• Documentation supporting capital expenditure
• Accounting records supporting unusual or high-value transactions
• Other documents specifically requested by SARS

SARS states that proper accounting records, tax invoices and bills of entry form an important audit trail for VAT compliance. Under the Tax Administration Act record-keeping framework, records generally need to be retained for five years, with longer retention potentially applying in circumstances such as an unresolved audit, investigation or dispute.

The objective is simple: the amount declared on the VAT201 should be capable of being traced back to reliable source documents.

The 21-business-day rule: what businesses should understand

SARS states that, generally, a properly refundable VAT amount should be paid within 21 business days after receipt of the correctly completed VAT return. Where the statutory requirements for interest are met and the refund is not paid within the applicable period, interest may become payable.

However, the 21-business-day rule is not an unconditional guarantee that every refund will be paid within 21 business days. The VAT Act provides circumstances in which SARS may withhold a refund or the calculation of the period may be suspended or recalculated.

• The VAT return is incomplete or defective;
• the vendor has not provided required banking details;
• VAT returns or other required returns are outstanding;
• SARS cannot obtain access to the vendor’s books and records; or
• a verification, inspection or audit of the refund has not been finalised, subject to the applicable rules.

There is an important 2026 development. Amendments to section 45 of the VAT Act broaden the circumstances in which SARS is not liable for interest on a delayed refund. In particular, where a vendor fails to provide required banking details, supporting documentation or applicable indemnifications, interest is not payable for the period attributable to that failure.

Businesses should therefore distinguish between a refund being delayed and SARS necessarily being liable for interest for the entire period of the delay.

Poor record-keeping can become a cash-flow problem

The consequences of weak VAT records extend beyond administration.

Consider a business expecting a R500,000 VAT refund to fund supplier payments, salaries, stock purchases or other operating expenses. If SARS requests supporting documentation and the business cannot provide the information promptly, the refund process may remain unresolved while staff search for invoices, reconstruct reconciliations or investigate discrepancies.

The commercial consequence can be significant:

• Delayed cash flow
• Additional administration and staff time
• Greater compliance risk
• Potential disputes over the amount refundable
• Reduced confidence in the business’s VAT reporting process

For smaller businesses in particular, a delayed refund can place significant pressure on working capital. VAT record-keeping should therefore be viewed as a financial control, rather than merely a SARS compliance requirement.

Internal controls that can reduce refund-related problems

Businesses can reduce avoidable refund-related problems by introducing practical controls into the VAT process.

• Monthly VAT reconciliation — Compare the VAT control account with the accounting records and VAT201 information, and investigate reconciling items before submission.
• Document verification — Confirm that purchase invoices and other supporting documents for input tax claims are available, valid and properly recorded.
• Review of unusual transactions — Identify large purchases, credit notes, imports, capital expenditure and transactions with unusual VAT treatment for specific review.
• Independent review before submission — Where practical, have another appropriately skilled person review the VAT reconciliation and VAT201 before submission.
• Document retention — Maintain an organised electronic or physical VAT file so that supporting documents can be retrieved promptly when required.
• Exception reporting — Track material reconciling items, missing documents and unusual VAT transactions rather than allowing them to accumulate from one period to the next.

These controls cannot guarantee that a refund will not be selected for verification. They can, however, place the business in a much stronger position when SARS asks questions.

VAT modernisation: what could change?

SARS’s VAT Modernisation initiative is moving VAT administration towards a more digital, data-driven and progressively automated model. As at September 2026, SARS has published a VAT Modernisation Consultation Paper and related FAQs for public consultation.

The proposed direction includes the use of e-invoices, e-credit notes and e-debit notes, an interoperability framework and e-reporting to support the secure, structured and near-real-time flow of VAT transaction data. SARS also describes the longer-term direction as supporting data analytics, AI-enabled risk detection and the foundation for VAT auto-assessment.

This is important for refund processes because better transaction-level data could allow SARS to perform more automated matching and risk assessment before or when a VAT return is submitted.

Under the current approach, a simplified refund process can look like this:

Vendor submits VAT201 → refund identified → SARS risk assessment → supporting documents requested where applicable → vendor responds → SARS verifies information → refund released.

Under the intended modernised model, the process could become more data-driven:

Supplier issues e-invoice → structured transaction data is transmitted → SARS can match transaction data → VAT201 is submitted → risk is assessed using richer data → lower-risk claims may potentially be processed more efficiently.

This does not mean that every VAT refund will automatically be paid immediately. SARS will continue to have the ability to verify or audit claims where risks, inconsistencies or errors are identified. The practical implication for businesses is that the consistency and quality of transaction data will become increasingly important.

The real lesson: a VAT refund starts long before the VAT201

A VAT refund is not created only when the VAT201 is submitted. The quality of the refund claim is built through the accounting, invoicing, transaction processing and reconciliation controls that operate throughout the VAT period.

Accurate accounting records, valid documentation and regular reconciliations create the audit trail needed to support a refund and protect business cash flow. As VAT modernisation moves towards earlier access to reliable transaction data, businesses with strong VAT controls will be better positioned to respond to SARS verification requirements and to benefit from more data-driven compliance processes.

For businesses that regularly generate VAT refunds, a proactive VAT review can therefore be an important compliance and cash-flow control.

The question is not simply: “When will SARS pay my refund?”

It is also: “If SARS asks tomorrow, can I prove every rand of it?”