New tax headache for diesel buyers in South Africa

The South African Revenue Service (SARS) has overhauled its diesel refund registration system, requiring all businesses in South Africa to re-register, as existing users will not be migrated to the new system automatically.

The system has been in the works since last year and took effect on 18 September, but according to law firm Webber Wentzel, it is more than just an administrative change.

That is because South Africa is shifting to a modernised and dedicated diesel refund framework outside the value-added tax (VAT) system.

This new system introduces new registration obligations, greater supply-chain visibility and possibly a renewed focus on compliance and substantiation.

“The move appears to reflect SARS’ intention to exercise greater visibility and oversight over diesel refund claims,” said the firm.

“The introduction of dedicated registration requirements, industry-specific categorisation and mandatory participation by fuel suppliers suggests a more structured approach to administering the incentive going forward.”

That said, the registration process is only the first step in the transition, while questions remain regarding what the new system will mean in practice for compliance and substantiation requirements.

“Historically, diesel refund audits have often focused on whether taxpayers could adequately demonstrate qualifying use through documentary evidence, operational records and logbooks,” said Webber Wentzel.

“The adequacy of those records has been the subject of numerous disputes between SARS and taxpayers over the years.”

SARS has also yet to outline whether it will alter these requirements or introduce new standards, meaning businesses are preparing for a new claims environment without complete certainty.

On top of this, the new framework introduces a level of dependency on fuel suppliers that did not previously exist.

“Under the revised system, suppliers are required to register and participate in the administration of claims,” explained the firm.

“The requirement for diesel sellers to register is intended to create a more verifiable supply chain and strengthen the integrity of the system.”

Webber Wentzel said the key challenge is ensuring suppliers and users are registered, while avoiding unnecessary administrative burdens arising from the additional compliance requirements.

Modernising the old system

On 12 December 2025, SARS announced plans to modernise the diesel refund system and give diesel refund claimants a streamlined, digitally improved experience that maximises service delivery and compliance.

The new Diesel Refund System would provide a platform for diesel sellers and eligible diesel consumers to register and claim diesel refunds under Schedule 6 of the Customs and Excise Act on a standalone system decoupled from the VAT system.

Following this, the revenue service announced that, effective 1 April 2026, primary sector claimants will be entitled to claim a refund on 100% of eligible diesel used in farming, forestry, and mining activities.

By March, SARS told stakeholders that the new Diesel Refund Registration System would open later than initially communicated, since it needed time to pilot and test the system.

This was completed in September, when SARS shared that the key changes were implemented.

Alongside decoupling diesel refunds from the VAT-linked system, the revenue service informed existing users that registration on the new system is not automatic, adding that sellers also need to register.

It also said that eFiling now includes a dedicated dashboard to provide visibility of applications, registrations, and seller relationships.

To ensure that this runs smoothly, refund users need to register through eFiling, ensure that their SARS legal-entity profile is valid and confirmed, gather business-activity information, and be prepared to create seller relationships.

“If implemented successfully, the new system could improve processing times, support more predictable cash flow and provide SARS with better tools to combat abuse of the diesel refund regime,” said Webber Wentzel.

Businesses that need to create or manage diesel refund relationships can follow the SARS guide when doing so.