The South African Revenue Service (SARS) issued VAT Ruling: VR 020 – Consideration (VR 020) on 28 April 2026. The ruling addresses the Value-Added Tax (VAT) treatment of deposits received by game reserves when guests forfeit those deposits after cancelling bookings.
The ruling took effect on 1 December 2023 and applies to the specific transactions described in the document. Importantly, SARS clarifies forfeited deposits and explains how VAT applies within the tourism and hospitality sector.
VAT treatment of forfeited deposits
A VAT ruling responds to an application and clarifies how the Commissioner interprets and applies the provisions of the Value-Added Tax Act, No. 89 of 1991 (VAT Act), to a specific proposed transaction. When issued as a Binding Private Ruling, it binds SARS in relation to the applicant concerned. However, once published, it mainly indicates SARS’ interpretive approach and does not create a practice generally prevailing.
The latest ruling does not introduce a new principle. Instead, it applies existing VAT provisions to a defined commercial arrangement. As a result, it confirms how SARS expects those provisions to operate in the tourism and hospitality context. SARS clarifies forfeited deposits by reinforcing that VAT treatment depends on the nature of the payment rather than the use of the service.
The key message for operators is clear. Businesses that historically treated forfeited deposits as falling outside the VAT net will now need to reassess their position.
The issue in practice
Deposits remain a standard commercial feature in the tourism sector. According to the ruling, the applicant, a game reserve, requires guests to pay a percentage-based, non-refundable deposit within ten days of reservation confirmation.
Guests must then pay the remaining balance within a specified number of days before arrival. If a guest cancels or partially cancels a confirmed reservation, the reserve forfeits the deposit or a specified portion of it.
The practical VAT question is straightforward:
Where a deposit is ultimately forfeited because the guest cancels and does not arrive, does that amount remain subject to VAT, or does the cancellation alter the position?
SARS’ position – the deposit does not change its character
SARS confirms that a deposit paid by a guest constitutes consideration, as defined in section 1(1) of the VAT Act, for the supply of accommodation provided by the Applicant.
Based on the facts contained in the ruling, two consequences follow:
- Output tax must be accounted for and declared during the tax period in which the deposit is set off as payment against the total booking amount. This treatment aligns with sections 7(1)(a) and 9(1).
- If the reservation is cancelled or partially cancelled, and the deposit is forfeited, that amount does not constitute a cancellation envisaged in section 21(1)(a). Therefore, it does not create an adjustment under the cancellation provisions.
The basis for the second point is straightforward. The deposit does not change its character simply because the guest does not arrive. Instead, it remains consideration for the supply, and VAT therefore continues to apply accordingly. Through this interpretation, SARS clarifies forfeited deposits and removes uncertainty around their VAT treatment.
Consistency with existing guidance
The position articulated in VR 020 aligns with SARS’ existing published guidance on accommodation establishments.
SARS previously indicated in its Guide for Entertainment, Accommodation and Catering (LAPD-VAT-G04) that accommodation establishments must account for VAT on deposits when the amount is either forfeited or applied as payment for a supply. The ruling now applies that principle to the specific facts presented by the applicant.
In this sense, the ruling does not elevate the legal position. Rather, it applies the existing position. However, it does provide a clear and binding articulation of SARS’ interpretation on a defined set of facts within the sector.
Why this matters for game reserves and the wider sector
For game reserves, deposits remain central to the business model. The ruling’s facts reflect a structure commonly used across the sector. These include advance reservations, non-refundable deposits payable on confirmation and tiered cancellation policies that determine which portion of the deposit the reserve retains.
The practical implications are threefold:
- Output tax must be accounted for when the deposit is set off against the total booking amount. Operators should therefore not defer VAT to the actual stay date.
- A forfeited deposit does not trigger an adjustment because the underlying supply has not been cancelled. In addition, the nature of the supply has not fundamentally varied or changed.
- Operators should revisit prior VAT treatments where they regarded forfeited deposits as falling outside the VAT net.
A broader takeaway
Although the ruling arose within the context of a game reserve, the principle is not sector-specific. Deposits, advance payments and cancellation policies appear across many industries.
VR 020 reinforces a broader VAT principle. The treatment of a payment depends on what the payment relates to, rather than whether the recipient ultimately uses the underlying service.
Rulings of this nature also serve a practical function. They provide operators with a clear reference point when aligning VAT treatment with SARS’ interpretation in specific commercial contexts, especially where legislation intersects with complex real-world arrangements.
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| Megan Langton | Tax Attorney | mail me | | Darren Britz | Partner | Head | Tax Legal | mail me | |
| | Tax Consulting SA | | |
