The South African Revenue Service (“Sars”) has, on 28 April 2026, issued VAT Ruling: VR 020 – Consideration (“VR 020”), addressing the Value-Added Tax (“VAT”) treatment of deposits received by game reserves where those deposits are subsequently forfeited upon cancellation of a booking. The ruling is effective from 1 December 2023 and applies to the specific transactions described therein.

A VAT ruling is issued in response to an application and clarifies how the Commissioner would interpret and apply the provisions of the Value-Added Tax Act, No. 89 of 1991 (“VAT Act”) to a specific proposed transaction. Where issued as a Binding Private Ruling, it is binding on Sars in respect of the applicant concerned; however, when published, it serves as an indication of Sars’ interpretive approach and does not constitute a practice generally prevailing.

The latest ruling does not introduce a new principle. It applies existing VAT provisions to a defined commercial arrangement, confirming how Sars expects those provisions to operate in the tourism and hospitality context.

The important message for operators is that those who have historically treated forfeited deposits as falling outside the VAT net will need to reassess their position.

The Issue in Practice

Deposits are a standard commercial feature in the tourism sector. As described in the ruling, the Applicant, a game reserve, requires a percentage-based, non-refundable deposit to be paid within ten days of a reservation confirmation. The remaining balance falls due within a specified number of days prior to arrival. Where a guest cancels or partially cancels a confirmed reservation, the deposit, or a specified portion thereof, is forfeited.

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. On the facts of the ruling, two consequences follow:

• Output tax must be accounted for and declared in the tax period during which the deposit is set off as payment against the total amount required for the booking, in accordance with sections 7(1)(a) and 9(1); and
• Where the reservation is cancelled or partially cancelled, and the deposit is forfeited, that amount does not constitute a cancellation as envisaged in section 21(1)(a), and therefore does not give rise to an adjustment under the cancellation provisions.

The basis for the second point is clear. The deposit does not change its character simply because the guest does not arrive. It remains consideration for the supply, and VAT follows accordingly.

Consistency with Existing Guidance

The position articulated in VR 020 is consistent with Sars’ existing published guidance on accommodation establishments. Sars has previously indicated, in its Guide for Entertainment, Accommodation and Catering (LAPD-VAT-G04), that an accommodation establishment must account for VAT on a deposit where the amount is either forfeited or applied as payment for a supply. The ruling applies that principle to the specific facts presented by the Applicant.

In that sense, the ruling does not elevate the legal position; it applies it. What it does provide is a clear, 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 are central to the business model. The ruling’s facts reflect a structure that is common across the sector: advance reservations, non-refundable deposits payable on confirmation, and tiered cancellation policies that determine what portion of the deposit is retained.

The practical implications are threefold:

• Output tax must be accounted for at the point of set-off against the total booking amount, not deferred to the date of the stay;
• A forfeited deposit does not trigger an adjustment, as the underlying supply has not been cancelled, nor has the nature of the supply been fundamentally varied or altered; and 
• Operators should revisit prior VAT treatments where forfeited deposits were regarded as falling outside the VAT net.

A Broader Takeaway

Although issued in the context of a game reserve, the principle is not sector-specific. Deposits, advance payments, and cancellation policies arise across a range of industries. 

VR 020 reinforces a broader VAT point: the treatment of a payment is determined by what it relates to — not by whether the underlying service is ultimately utilised by the recipient.

Rulings of this nature also serve a practical function in providing a clear reference point for operators seeking to align their VAT treatment with Sars’ interpretation in specific commercial contexts, particularly where legislation meets complex real-world arrangements.

Written by Darren Britz, Partner and Head of Tax Legal at Tax Consulting SA; and Megan Langton, Tax Attorney at Tax Consulting SA