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Get Compliant from Anywhere, Easy and Fast!

0800 007 269 (Toll Free)
Get Compliant from Anywhere, Easy and Fast!

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  • Business Compliance

VAT Increase on 1 May 2025 Officially Cancelled

The VAT increase has been cancelled, here is what your business needs to know in SA

In a significant turn of events, the anticipated 0.5% increase in Value-Added Tax (VAT), scheduled for 1 May 2025, has been officially scrapped. This follows a court order and a reversal of Finance Minister Enoch Godongwana’s Budget 2.0 proposal. South African businesses and VAT vendors must once again revisit their invoicing, pricing, and compliance processes. The South African Revenue Service (SARS) has since released updated guidelines to help businesses navigate the implications of this reversal.

This article provides a comprehensive breakdown of the SARS announcement, how this decision came about, what it means if you’ve already implemented the VAT increase, and how it impacts your compliance responsibilities as a business.

Make sure your business compliance with VAT increase 2025 or lack thereof

SARS' Official Announcement: The VAT Rate Stays at 15%

On 27 April 2025, SARS Commissioner Edward Kieswetter, officially praised the court decision verifying that the 0.5 percentage point VAT increase will not be implemented from 1 May 2025. The court’s decision has legally stopped the suggested increase, hence upholding the current VAT rate of 15%.

According to SARS, this order brings much-needed clarity and allows SARS to efficiently administer the VAT Act. All VAT-registered companies and suppliers are now required to only charge 15% VAT on goods and services as of 1 May 2025. The Commissioner urged companies/suppliers and consumers to ensure correct VAT charges are applied at the point of sale. If consumers are charged 15.5%, they are allowed to raise the issue with the company/supplier immediately for correction.

How It Came About: Budget Reversal and Public Outcry

The proposed VAT increase in the Finance Minister’s 2025 Budget 2.0 would have been spread over several years. The proposal called for a 0.5% rise on the 1st of May 2025 and a last hike to 16% by 2026. Rising fiscal challenges were the driving force for assisting the government to generate more income.

Although the budget narrowly passed through Parliament, it faced considerable backlash from the public, industry stakeholders, and economists, citing the regressive nature of VAT and its disproportionate impact on low-income households. Godongwana, the finance minister, cancelled the VAT increase in reaction to the overwhelming protest, and on 24 April 2025, brought before Parliament the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

SARS acknowledged that many companies and suppliers had already begun preparations to implement the VAT increase, investing time and resources into system updates and pricing adjustments amid significant uncertainty.

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Already Implemented the VAT Increase 2025? Here's What SARS Says to Do

SARS has given specifics on how to reverse the modifications made by VAT suppliers using the 15.5% VAT rate in their point-of-sale systems, invoicing, or pricing. SARS’s main suggested activities are as follows:

  • The 15.5% VAT rate’s rollout must stop right away for companies/suppliers still adjusting.
  • Vendors have until May 15, 2025, to fix any system problems and return to 15% under a rigorous adjustment window.
  • If your system is not yet capable of reverting to 15% due to complexity, you must continue accounting for supplies at 15.5% until the necessary corrections are made, but no later than 15 May 2025.
  • Accurate VAT Reporting:
    • Report 15.5% VAT transactions in Field 12 (for output tax) and Field 18 (for input tax) of the VAT201 form.
    • If any refunds or adjustments are made to reverse the 0.5% difference, these must also be reflected in Fields 12 and 18, respectively.
  • You must also undo any changes you made to zero-rating classes in line with the now-cancelled hike before 1 May 2025.
  • VAT returns submitted for tax periods beginning 1 May 2025 will be automatically calculated at 15%.
Already implemented the VAT increase 2025, here is what to do
Expert tip from Company Partners on the vat increase 2025

SARS, according to their statement, would consider these disclosures during any audits or verifications of the impacted VAT periods. This underlines the need for documenting any modifications to the system or pricing during this time of transition.

Rolling back to 15% or registering for the first time? We make VAT compliance simple and stress-free.

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What This Means for Business and VAT Compliance

The reversal of the VAT increase has both advantages and disadvantages. Businesses will have to quickly revert to the 15% VAT rate, adjusting their systems for the second time in a matter of weeks, but many consumers are relieved, due to recent price hikes on basic goods and services.

Key Compliance Takeaways:

  • Everything at checkout must be exact; any costs over 15% must be corrected immediately. Employees must be trained on how to handle price changes and how to properly interact with customers.
  • Check that every one of your financial records, point-of-sale systems, invoice templates, and supplier contracts shows 15% VAT.
  • When submitting your VAT201 Vender Declaration, use the correct fields (12 and 18) to declare any discrepancies or corrections related to temporary 15.5% VAT charges. SARS has pledged to be lenient with suppliers that act in good faith and timely compliance.
  • SARS is committed to giving regular clarity to help reduce uncertainty. Businesses and suppliers should therefore follow official SARS notifications and bulletins to remain updated and compliant.

Final Thoughts: Adapting with Agility

Companies have to act quickly yet cautiously by reviewing internal processes, retraining staff members, interacting with customers and suppliers, and filing suitable VAT returns. There is still discussion of raising it to 16% by 2026 despite the present choice to postpone the VAT increase, indicating that this may not be the end of VAT adjustments in South Africa.

Commissioner Kieswetter acknowledged the complexity and confusion caused by the last-minute change. He assured vendors that SARS will continue to support them through this adjustment period, encouraging transparency and compliance over punitive measures.

Need Help with VAT?

Company Partners has assisted thousands of South African companies in navigating these ever-changing regulations. Our Tax & VAT Experts are ready to assist with your VAT reporting, VAT Registration, and SARS compliance.
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