Fake VAT refund claims: 5 years in jail and penalties up to 200%

Claiming a VAT refund you aren't entitled to is a criminal offence in South Africa that carries up to five years in prison, and SARS can add a penalty of up to 200% of the tax involved on top of paying the money back. (Tax Administration Act, s235; s223)

SARS is pushing the message after 14 accused, five entities and nine individuals, appeared in the Siyabuswa Magistrates' Court in Mpumalanga over an alleged R3.99 million VAT refund scheme. (SARS)

What is SARS alleging in the R3.99 million case?

SARS and the National Prosecuting Authority (NPA) say false VAT returns were submitted on eFiling in the name of an entity between June 2016 and June 2020, costing SARS about R3.99 million. (SARS)

• Arrests were made in Mpumalanga, Gauteng and North West, with help from the Hawks.
• The accused first appeared in court on 6 October 2026, and bail proceedings were continuing when SARS announced the case on 7 October.
• SARS says the case is part of a wider probe, Project Jan Vas, into an alleged syndicate of South African and foreign nationals targeting the tax system in Mpumalanga, Limpopo, North West and Gauteng.

These are allegations. None of the accused has been convicted, and the case is still before the court. (SARS)

What does the law say about fake VAT refund claims?

Section 235 of the Tax Administration Act makes it an offence to intentionally evade tax or obtain an undue refund. That includes false statements on a return, false answers to SARS, falsified books or records, and false statements made to get a refund. (s235)

On conviction, the penalty is a fine or up to five years in prison. Someone who signs a false return can be treated as knowing it was false unless they show a reasonable possibility they didn't know, and that this wasn't due to their own negligence. (s235)

Criminal fraud charges can bring heavier sentences. In July 2026 the Specialised Commercial Crimes Court in Palm Ridge sentenced a man to an effective 25 years after he and his close corporation pleaded guilty to 127 counts of fraud and 66 counts of money laundering linked to R62 million in false VAT refund claims over 12 years. (SARS)

How big are the SARS penalties?

Separate from any criminal case, SARS charges an understatement penalty based on how serious the behaviour was. For intentional tax evasion, the highest category, the rates are: (s223)

• 150% of the shortfall in a standard case
• 200% if the taxpayer is obstructive or it is a repeat case
• 75% if the taxpayer comes forward voluntarily after being told of an audit or criminal investigation
• 10% if they come forward before being notified

These come on top of the tax itself and interest. Lower rates apply to lesser behaviour, from 10% for a substantial understatement to 100% for gross negligence in a standard case. (s223)

Is an honest mistake on a VAT return fraud?

No. An incorrect return is not automatically a crime. Intentional evasion needs intent: SARS's own guide says it applies when a taxpayer knew, or foresaw, that their behaviour could cause an understatement and went ahead anyway. (SARS understatement penalty guide)

Disagreeing with SARS on how VAT law applies is a dispute, not fraud, and it is handled through objections and appeals. (Moneyweb)

How is SARS catching VAT refund fraud?

SARS says it is relying on data analytics and digital risk detection to flag suspicious transactions earlier, plus intelligence sharing with the NPA and the Hawks. (SARS)

"Every rand stolen through VAT fraud is a rand taken away from building a capable state," SARS Commissioner Johnstone Makhubu said. (SARS)

How do you report suspected tax fraud?

You can report a suspected tax or customs crime through the online forms on SARS's report a tax crime page, or call the anonymous line on 0800 00 2870. There is a separate form if your eFiling profile was hacked or a refund was paid into a fraudulent bank account. You can stay anonymous, but SARS will not give you feedback on any investigation. (SARS)