Diesel rebate reforms: Treasury removes 80% cap
· Citizen
The impact of high international oil prices on fuel prices in South Africa, particularly diesel prices, makes reforms to the rebate system increasingly important.
The system was introduced to provide relief from the general fuel levy and the Road Accident Fund levy when diesel is used for off-road production activities such as farming, mining, fishing, and forestry.
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Diesel refund
However, after a decade-long journey of reforms, the only change came at the start of April, when on-land diesel users were allowed to start claiming a refund of 100% on the levies, instead of the previous 80%.
This is not a “broad concession”, writes Leanne Wium, director of TRM Tax Attorneys, on its website. “It is a move back towards the original policy rationale of the diesel refund regime.”
The diesel refund is not governed by general tax principles. It is a statutory rebate system under the Customs and Excise Act. “Entitlement depends on strict compliance with the rules in Schedule 6.
“If these rules are not met, the claim fails, even if the diesel was in fact used in operations,” says Wium.
Diesel rebate reforms
Reform talks started as early as 2015, with the main objective to address operational challenges in the rebate system.
Christo Theron, founder of TradeTaxPlus and an indirect tax specialist, says that despite several submissions from interested parties, many operational challenges remain. The amended Customs and Excise Act was approved in 2022 but has yet to come into effect.
The South African Institute of Chartered Accountants (Saica) noted in a December 2025 feedback summary that the reforms resulted in amendments separating the refund mechanism from the value-added tax (Vat) system and modernising the entire value chain.
The changes are supposed to reduce administrative burdens, broaden access and strengthen fraud prevention.
Sars needs time to pilot system
Kagiso Nonyane, senior indirect tax manager at BDO, says the standalone diesel rebate system requires all users of the rebate to re-register. Registrations were supposed to open in April.
However, the South African Revenue Service (Sars) needed more time to pilot and test the system, to ensure it is “stable, secure and functional”, according to a letter to stakeholders in March this year.
Theron says diesel users must register everyone in their value chain on their profile with Sars. This includes the user, supplier, distributor, as well as all assets used in eligible activities listed in the act.
“The April deadline was ambitious, and I personally do not think the registration system will be live before the end of this year,” he says.
Risky business
Wium notes that mixed-use environments are a recurring risk area.
If diesel is used partly for qualifying operations and partly for non-qualifying functions, the taxpayer must be able to apportion that use on a consistent and defensible basis.
“That, in turn, makes record-keeping the real make-or-break issue,” she notes.
Logbook record-keeping in the current system remains onerous. Claimants have to account for every kilometre, says Theron.
Sars has increasingly challenged claimed rebates, mostly because of deviations from the logbook record-keeping requirements. In most of these cases, the courts decided in favour of Sars.
In a relatively recent case before the Supreme Court of Appeal, mining company Assmang was ordered to repay Sars almost R40 million in diesel refunds and interest due to inadequate record-keeping.
Theron says many of these court challenges do not align with practical operations, making the administrative and record-keeping requirements extremely burdensome.
However, it appears that diesel users are not entirely blameless, seeking shortcuts because of the taxing requirements.
Once the new legislation becomes effective, the rebate will be directly linked to eligible activities.
Know the changes
Some of the administrative changes in the amended legislation include the keeping of monthly logbooks for diesel storage and usage, as opposed to daily records. Sars will provide prescribed minimum usage logbooks, or users may submit their own simplified versions.
However, record-keeping remains a challenge under the reformed system, says Theron.
The effort to comply in terms of data and record-keeping, compared with the benefit, means the rebate is mainly accessible to mega-farmers – the people who put food on the table.
Nonyane cautions that all diesel refund users must familiarise themselves with the requirements of both the current and new diesel refund scheme legislation.
It is important to understand the extend of system changes in order to fully benefit from it and to ensure full compliance. The Customs and Excise Act contains harsh penalty provisions, therefore it is essential for users to be compliant at all times, Nonyane warns.
This article was republished from Moneyweb. Read the original here.