On 23 June 2026, the Constitutional Court delivered a unanimous judgment in Lueven Metals (Pty) Ltd vs Commissioner for the South African Revenue Service (SARS). The court confirmed that the zero-rating of gold under section 11(1)(f) of the Value Added Tax Act No. 89 of 1991 (VAT Act) does not apply to second-hand or recycled gold that has already undergone prior manufacturing.
The court had to determine whether gold previously manufactured into products such as jewellery could subsequently benefit from the zero-rating provisions contained in section 11(1)(f). This would apply after the gold had been refined and supplied to a prescribed purchaser. Such purchasers include the South African Reserve Bank (SARB), the South African Mint Company, or a registered bank.
The Constitutional Court’s answer was clear: no. The judgment provides important guidance on the interpretation of section 11(1)(f). It confirms that the manufacturing history of gold remains relevant when determining whether a supply qualifies for VAT zero-rating. The VAT treatment of gold depends not only on its form at the time of supply. It also depends on whether it has previously undergone disqualifying manufacturing processes.
SARS welcomes the outcome
SARS welcomed the ruling. It said that the judgment provides clear legal guidance, puts an end to aggressive VAT interpretations, and reinforces the tax authority’s commitment to enforcing tax law in a principled manner.
Said SARS Commissioner Johnstone Makhubu:
This judgment provides long-awaited clarity for gold, refining, and banking sectors by confirming that recycled or second-hand gold remains subject to VAT at the standard rate, supporting compliant businesses and fair competition.
The VAT dispute behind the decision
Lueven Metals (Pty) Ltd (Lueven) operates in the precious metals industry. Amongst other activities, it acquires, refines and resells second-hand gold-bearing materials. These include jewellery and other previously manufactured gold products.
In terms of a long-standing arrangement with Absa Bank Limited (Absa), a prescribed purchaser, Lueven refined second-hand gold-bearing material into gold bars. These bars had a purity level of at least 99.5%. Lueven then supplied the bars to Absa. Lueven’s position was that these supplies qualified for VAT zero-rating.
SARS disagreed. SARS accepted that the gold was supplied to a prescribed purchaser and met the prescribed purity requirements. However, it contended that the gold had previously been manufactured into jewellery and other gold products. As a result, SARS argued that the supplies were ineligible for zero-rating despite the subsequent refining process.
The High Court found in SARS’ favour. Lueven’s subsequent appeal to the Supreme Court of Appeal was dismissed on procedural grounds. The Court therefore did not determine the substantive VAT issue. Lueven thereafter approached the Constitutional Court.
Can gold’s history disqualify it from zero-rating?
The dispute centred on the proper interpretation of section 11(1)(f) of the VAT Act. That provision permits certain supplies of gold to prescribed purchasers to be zero-rated. To qualify, the gold must be supplied to a prescribed purchaser and in a prescribed form. It must also not have undergone any manufacturing process other than those specifically contemplated by the provision.
Whilst the parties agreed that the gold supplied by Lueven had been refined into the required form and supplied to a prescribed purchaser, they disagreed on the significance of the gold’s manufacturing history.
The question before the Constitutional Court was whether gold previously manufactured into jewellery could qualify for zero-rating after being refined back into pure gold. Alternatively, the question was whether that earlier manufacturing process disqualified the gold from the relief afforded by the VAT Act.
Lueven’s argument – wipe the slate clean
Lueven argued that once recycled gold has been refined into pure gold, its previous existence as jewellery or another manufactured product becomes irrelevant.
Lueven contended that refining and manufacturing are fundamentally different concepts. It argued that the refining process effectively removes the characteristics of the previous manufactured product.
On this interpretation, refined gold should qualify for zero-rating irrespective of whether it originated from newly mined gold or recycled jewellery. Lueven further argued that VAT generally focuses on the nature of the goods being supplied at the time of the transaction rather than their historical origins.
SARS’ argument – history matters
SARS adopted a different interpretation. It argued that section 11(1)(f) requires consideration of more than the form and purity of the gold at the point of supply.
SARS argued that the phrase “has not undergone”, as used in section 11(1)(f), requires consideration of the gold’s manufacturing history. On SARS’ interpretation, second-hand gold previously manufactured into jewellery or another product had already undergone a disqualifying manufacturing process.
Subsequent refining of that gold does not erase that history. Therefore, recycled gold derived from jewellery remains historically manufactured gold and falls outside the scope of the zero-rating provision.
The Constitutional Court looks beyond the final product
The Constitutional Court unanimously agreed with SARS. It held that section 11(1)(f) must be interpreted holistically. The court rejected Lueven’s argument that the subsequent refining of gold negates the relevance of its prior manufacturing history.
Whilst refining improves the purity of gold by removing unwanted materials, it does not erase the fact that the gold had previously been manufactured. Accordingly, second-hand gold that has undergone prior manufacturing processes other than those contemplated in section 11(1)(f) does not qualify for VAT zero-rating.
This means that recycled gold cannot simply regain zero-rated status because a subsequent refining process changes its physical form.
The broader significance of the judgment
The judgment provides important clarity on the scope of the VAT zero-rating provisions applicable to gold supplies.
In particular, the Constitutional Court confirmed that VAT treatment depends not only on the form of the gold at the time of supply. It also depends on whether it has previously undergone disqualifying manufacturing processes.
Taxpayers dealing in recycled or second-hand gold should therefore carefully consider its manufacturing history. They must do so when assessing whether a supply qualifies for zero-rating under section 11(1)(f).
The judgment makes clear that recycled gold carries its manufacturing history for purposes of this VAT provision. Consequently, businesses dealing in recycled gold should assess both its present form and its prior manufacturing processes before applying the zero-rating provisions.
 |
 |
| Dylan Jacobs | Admitted Attorney | Tax | mail me | | Andre Daniels | Head | Tax Controversy and Dispute Resolution | mail me | |
| | Tax Consulting SA | | |
