The decision by finance minister Enoch Godongwana’s to reverse the planned 0,5% VAT rate increase, initially set to take effect on 1 May 2025, has significant practical implications for VAT vendors and consumers.
As the administrator of all national government tax measures, SARS will ensure that the necessary adjustments are made to accommodate this change, according to SARS commissioner Edward Kieswetter.
He recognises that vendors and consumers have invested in preparing for an increase in VAT during a period of uncertainty from Parliament’s deliberations and public comments.
Since the increase has now been reverse, the following measures will apply to all VAT vendors with effect from 1 May 2025:
- VAT vendors who have not implemented the change in rate, they stop all development in this regard.
- Vendors are expected to charge VAT at the rate of 15% and not 15,5% for the relevant goods and services as per the VAT Act.
- Vendors may use limited time to adjust their systems accordingly. and report and pay the VAT.
- Should a vendor not be able to revert to the 15% rate, due to complex system changes that may be needed, such supplies and purchases must be reported and accounted for at the 15,5% rate until such time that they are able to make the necessary system adjustments which should be completed by no later than 15 May 2025.
- VAT transactions which were charged at 15,5% must be reported in filed 12 (for output tax) and field 18 (for input tax) of the VAT return.
- Adjustments in the form of refunds of the 0,5% rate to customers and from suppliers must equally be reported in fields 12 and 18 respectively.
- The VAT return declarations made will be taken into consideration when verifications and/or audits on the affected VAT tax periods are conducted.
- The VAT returns that are to be submitted will continue to calculate the VAT auto calculation using the 15% rate from tax periods or months commencing 1 May 2025.
Vendors who have already implemented both the rate changes and the Zero-Rating are encouraged to reverse those changes before 1 May 2025.
Kieswetter comments that he “understands the complexity and the confusion that has resulted from this process. SARS will do its best to provide further clarity to create certainty of obligation for all vendors.”