SARS Announces Reversal of Planned VAT Rate Increase: What Businesses Need to Know
The South African Revenue Service (SARS) has officially confirmed that the planned increase in the VAT rate from 15% to 15.5%, originally set to take effect on 1 May 2025, has been cancelled.
Finance Minister Mr. Enoch Godongwana made the decision to reverse the increase following further consideration of public feedback and Parliament’s deliberations. SARS Commissioner Mr. Edward Kieswetter assured businesses and consumers that SARS will facilitate the necessary adjustments to support the smooth implementation of this reversal.
The announcement acknowledges that many VAT vendors and consumers had already invested time and resources in preparation for the anticipated rate hike. SARS has pledged to provide clear guidance to ease the transition and minimise confusion.
Key Measures for VAT Vendors
According to the Minister’s announcement and Government Notice No. 6157 of 24 April 2025, the following measures now apply to all VAT vendors from 1 May 2025:
1. Vendors Yet to Implement the VAT Change
VAT vendors who have not yet made any changes for the expected rate increase must immediately stop any further development or adjustments related to the 15.5% VAT rate.
2. Vendors Who Had Started Implementation
Vendors who had already adjusted their systems to the 15.5% VAT rate are required to revert to charging the standard 15% VAT for all goods and services as specified in the VAT Act.
SARS acknowledges that some vendors may need a short adjustment period to update their systems and processes accordingly.
Reporting Special Cases
In cases where vendors are unable to immediately switch back to the 15% VAT rate due to system complexities:
Sales and purchases must temporarily continue at 15.5%.
All necessary system updates must be completed no later than 15 May 2025.
VAT transactions charged at 15.5% must be accurately reported in VAT returns:
Field 12 for output tax (VAT collected from sales)
Field 18 for input tax (VAT paid on purchases)
Any adjustments, such as refunds to customers or suppliers related to the 0.5% difference, must also be captured in the same VAT return fields.
SARS has confirmed that any VAT return declarations made during this transition period will be considered during audits or verifications for the relevant tax periods.
VAT Auto-Calculations
From 1 May 2025 onwards, SARS systems will automatically calculate VAT at the 15% rate for all tax periods and months going forward.
Vendors who had applied both the 15.5% VAT rate and any zero-rating measures are encouraged to reverse those changes before 1 May 2025 to avoid compliance issues.
SARS Reassures Vendors and Consumers
Commissioner Edward Kieswetter acknowledged the complexity of the situation and expressed understanding for the challenges faced by businesses. He emphasised that SARS will continue to provide clear communication and support to ensure certainty and ease of compliance for all VAT vendors.
"We understand the confusion and difficulty this reversal has caused. SARS remains committed to assisting vendors through this transition," Kieswetter said.