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South Africa: VAT and airtime vouchers – no relief for MTN

25 January 2021
– 4 Minute Read


The correct VAT treatment of vouchers for digital services has been a grey area for many years. Towards the end of 2020, Mobile Telephone Network (Pty) Ltd (MTN) applied for a declaratory order to obtain clarity in this regard.

The application for the declaratory order related to the difference between the VAT treatment of monetary vouchers (as provided for in section 10(18) of the Value Added Tax Act, 1991 (VAT Act)) and product-specific vouchers (as provided for in section 10(19) of the VAT Act). The difference between these two is as follows:

  • A monetary voucher as contemplated in section 10(18) providers the purchaser with a right to receive goods or services to the extent of the value stated on such voucher, for example, a gift card. The sale of the monetary voucher is disregarded for VAT purposes, and VAT will become payable when the monetary voucher is used to acquire goods or services.
  • Section 10(19) deals with a product-specific voucher which entitles the holder, on the surrender thereof, to receive the goods or services specified on such voucher. VAT becomes payable when the voucher is sold, not only when the goods or services are supplied.

On 12 January 2021, the Gauteng High Court in Pretoria turned down MTN’s application. The decision has implications for suppliers who sell vouchers, particularly those who sell multi-purpose vouchers.

The facts

MTN sells both single-purpose vouchers and multi-purpose vouchers to customers. The single-purpose voucher entitles the holder to specific products or services.

However, the multi-purpose voucher (referred to as an ‘airtime voucher’ by MTN) may be used for any of MTN’s services or products. The application for the declaratory order related to the multi-purpose voucher.

If the multi-purpose vouchers were subject to section 10(18) as opposed to 10(19), this would mean that the supply of airtime vouchers by MTN to its consumers would not trigger a VAT liability. Instead, VAT would only become payable once the voucher is activated and used to acquire different goods and services.

In 2017, MTN requested SARS to issue a ruling confirming that multi-purpose vouchers are subject to section 10(18) of the VAT Act. However, SARS refused to issue such a ruling.

MTN then applied to the High Court in Pretoria for a declaratory order that the sale of its multi-purpose vouchers constitutes a supply as envisaged in section 10(18). It further requested the Court to set aside the SARS ruling, to the extent necessary.

The arguments

SARS argued that it was not appropriate for MTN to seek a declaratory order, as the facts were not clear and certain. MTN argued that there was no dispute of fact, but that the issue was one of interpretation and application of the law. The Court agreed with MTN that it was entitled to seek clarity with respect to SARS’ interpretation of the relevant provisions of the VAT Act.

The Court then considered the interpretation of sections 10(18) and 10(19), referring to the Explanatory Memorandum which was released when these two subsections were originally introduced. The Explanatory Memorandum used the example of a gift voucher to explain the circumstances in which section 10(18) would apply.

The Court, however, was of the view that the multi-purpose voucher was specifically an ‘airtime’ voucher and was not akin to a gift voucher which could be used to pay for goods or services. Although the multi-purpose voucher could be used to make or receive calls, send messages or to use the internet or data, the Court was of the view that this did not detract from the fact that it purchased ‘airtime’. Accordingly, the Court held that the sale of the multi-purpose vouchers was subject to section 10 (19). MTN is thus obliged to charge VAT on the sale of these vouchers in the period during which the voucher was sold.


Since the introduction of sections 10(18) and (19) in 2001, there has been a been a substantial increase in the use of vouchers to acquire digital products. It could be quite difficult to determine whether these vouchers should be dealt with in terms of section 10(18) or 10(19) of the VAT Act. Suppliers who sell vouchers, especially where they could be used to acquire digital products, would thus have to carefully consider the impact of this judgment on their business models.