COMMERCIAL LAW NEWS: VAT RATE REVERSAL
Legal and Operational Guidance for South African Businesses
Background
On April 24, 2025, Finance Minister Enoch Godongwana announced the reversal of the planned Value-Added Tax (VAT) rate increase from 15% to 15.5%, which was scheduled to take effect on May 1, 2025. This decision followed political opposition and legal challenges, leading to the maintenance of the VAT rate at 15%.
Implications for Businesses
The South African Revenue Service (SARS) has issued guidelines to assist VAT vendors in navigating this change:
1. For Vendors Who Have Not Implemented the 15.5% Rate: Cease all development related to the rate increase.
2. For Vendors Who Have Implemented the 15.5% Rate:
- Revert systems to the 15% rate by May 15, 2025.
- Until systems are adjusted, continue to account for VAT at 15.5%.
- Report transactions charged at 15.5% in field 12 (output tax) and field 18 (input tax) of the VAT return.
- Adjustments, such as refunds of the 0.5% difference to customers or from suppliers, should also be reported in these fields.
3. VAT Return Calculations: From May 1, 2025, VAT returns will auto-calculate using the 15% rate.
4. Audit Considerations: Declarations made will be considered during verifications or audits for the affected tax periods.
Legal Considerations
Businesses must ensure compliance with these guidelines to avoid potential penalties. Failure to revert systems to the 15% rate by the stipulated deadline may result in discrepancies during SARS audits.
In closing, the reversal of the VAT rate increase presents immediate legal and operational obligations for all affected businesses. It is critical that vendors act swiftly to realign their systems, accurately report any transitional discrepancies, and ensure full compliance by the SARS deadline of 15 May 2025
*****
This article is not intended to constitute any form of financial or legal advice.
For more information on how we can assist you please get in touch with us to schedule a consultation: (+27) 12 344 6353 / 4 / 5 or reception@serfonteinatt.co.za. We look forward to being of assistance to your legal needs.
*****