Two New VAT Rulings: What SARS Just Decided About Deposits and SETA Grants

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SARS published two VAT rulings on 28 April 2026 that carry practical consequences well beyond the specific applicants involved. One deals with forfeited booking deposits in the hospitality sector. The other tackles SETA grant funding received by a university. If you have clients in either space, these rulings deserve your attention.

VAT Ruling VR 020: The Deposit That Doesn't Disappear

A game reserve asked SARS a straightforward question: When a guest cancels and forfeits their deposit, does the game reserve owe VAT on that amount?

SARS said yes, but with an important twist on the timing:

• The deposit constitutes "consideration" for the supply of accommodation. That means VAT applies. But SARS ruled that output tax must only be declared when the deposit is set off against the final booking payment, not when the deposit is received and not when the cancellation happens. Until that point, the deposit sits as a liability on the balance sheet.

• The second part of the ruling is equally important. SARS confirmed that a cancelled booking does not constitute a cancellation under section 21(1)(a) of the VAT Act. Why? Because the supply of accommodation is considered to have been made available to the guest regardless of whether they actually show up. This means the game reserve does not need to issue a credit note when a booking is cancelled and the deposit is forfeited.

What this means for your clients in hospitality and tourism

If you have clients who charge non-refundable deposits, whether for accommodation, events, venues, or similar services, this ruling clarifies two things they need to get right. First, do not declare output tax on the deposit at the time of receipt. Declare it when the deposit is applied against the booking. Second, do not issue a credit note when a booking is cancelled and the deposit is kept. The supply is treated as having been made.

This is also a useful reminder that how a deposit is structured in your client's terms and conditions can affect its VAT treatment. As we explored in our article on Grant or Paid Service?, the substance of a transaction matters more than what it is called.

VAT Ruling VR 021: Not All SETA Funding Is a Grant

A public university received discretionary grant funding from a SETA to run a postgraduate fellowship initiative. The project covered five milestones, from student recruitment and course development through to course delivery and programme management. The university wanted to know: is this SETA funding a "grant" that can be zero-rated under section 11(2)(t), or is it taxable income?

SARS split the answer based on what each milestone actually delivers.

• Milestones which covered student recruitment and registration, and the actual delivery of five courses, were treated as consideration for exempt educational services under section 12(h)(i)(bb). No VAT output is due on these payments, but the university also cannot claim input tax on expenditure directly linked to these milestones.

• Milestones covering programme management, course development and redesign, and the development of a student support system, were ruled to be consideration for the supply of taxable services. These payments do not qualify as a "grant" as defined in section 1(1) of the VAT Act. As a result, zero-rating under sections 8(5A) and 11(2)(t) does not apply. Standard rate VAT at 15% applies to these milestone payments. The good news is that the university can claim input tax on expenditure directly attributable to these milestones.

What this means for your clients receiving SETA or institutional funding

The key principle from this ruling is that the VAT treatment of funding depends on what the money is actually paying for, not on what the agreement calls it. If the funder is getting a deliverable in return, especially a non-educational one, it is likely a taxable supply.

For accountants advising universities, training providers, NPOs, or any entity receiving conditional funding tied to milestones, this ruling reinforces what the Tax Court confirmed in the SLGGM case: the label "grant" does not automatically create grant treatment. Review the MoA or funding agreement carefully. If deliverables, reports, and milestones are involved, some or all of the funding may be taxable.

This connects directly to the updated Interpretation Note 59 on government grants, which we covered in Updated IN 59 on Tax Treatment of Government Grants. That note applies to income tax treatment, but the underlying principle is the same: substance over form.

Both rulings are binding only on the specific applicants. They do not constitute a practice generally prevailing. But they reveal how SARS is thinking, and that is exactly the kind of intelligence your clients need you to bring to the table.