The South African Constitutional Court released a unanimous judgment in Lueven Metals (Pty) Ltd v Commissioner for the South African Revenue Service (SARS), settling the dispute over the application of the zero VAT rate on gold supplies. Following the Court's decision, the SARS Commissioner published a public notice commenting on the judgment.

Zero-Rating of Gold Supplies

The case between Lueven Metals, a company that buys and resells second-hand gold, such as scrap jewelry, and SARS centers on the VAT treatment of recycled or refined gold. The company had an agreement with Absa Bank Limited to supply gold bars refined to 99.5% purity. To achieve this, the company deposited its less pure gold scrap with Rand Refinery, which then melted and refined the gold before delivering pure bars to Absa and other purchasers.

For years, the company treated these sales as zero-rated, which allowed Absa to buy gold bars without VAT. Such treatment also enabled the company to deduct the input VAT paid to suppliers of the second-hand gold it purchased. However, after an audit in 2021, SARS determined that the second-hand gold the company used to supply Absa had already undergone a prior manufacturing process. As a result, SARS concluded that the supply of gold did not qualify for zero-rating.

The High Court ruled in favor of SARS, and the Supreme Court of Appeal (SCA) dismissed the appeal on a preliminary jurisdictional point without reaching the merits. In an earlier 2025 Constitutional Court judgment, the Court held that the SCA erred. It also confirmed the High Court's decision to entertain the declaratory relief application on its merits. As a result, the substantive interpretation question was sent back for additional determination.

In late June 2026, the Constitutional Court ruled that the zero VAT rate applies only when the gold is supplied in one of the legally prescribed forms and has not undergone any manufacturing process other than refining or the production of those prescribed forms. Moreover, the Court confirmed that second-hand or recycled gold, which has already been manufactured into another product before being recovered, does not qualify for zero-rating.

The SARS Commissioner welcomed this decision, adding that it provides legal certainty for vendors, banks, and participants in the precious metals industry while reinforcing SARS's position that tax legislation must be applied strictly in accordance with its wording.

Conclusion

Given that South Africa is the 11th-largest producer of gold in the world and that its estimated value is between USD 14 billion and USD 22 billion, the ruling provides greater certainty regarding the VAT treatment of qualifying gold supplies. In a broader sense, the ruling strengthens consistent and fair application of VAT law and protects the country's tax base.