Practical implications of reversing the 0.5% VAT increase
All shops and other entities that charge VAT had to quickly get their systems ready for the VAT increase and must now reverse the process.
The decision by finance minister Enoch Godongwana to reverse the VAT increase of 0.5% that was supposed to come into effect on 1 May as well as the 0.5% increase next year, has several practical implications.
Edward Kieswetter, commissioner of the South African Revenue Service (Sars), says the decision has significant practical implications for VAT vendors and consumers and that Sars will ensure the necessary adjustments are made to accommodate this change.
He also acknowledges 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.
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Measures for VAT vendors from 1 May
According to the media statement announcing the reversal of the VAT increase and Government Notice No 6157 of 24 April 2025 published in the Government Gazette introducing the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, these measures will apply to all VAT vendors with effect from 1 May 2025.:
VAT vendors who have not implemented the change in rate must 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 according to the VAT Act. Vendors can use limited time to adjust their systems accordingly and report and pay the VAT.
Vendors who are unable to revert to the 15% rate due to complex system changes that may be needed must report and account for supplies and purchases at the 15.5% rate until they are able to make the necessary system adjustments which should be completed no later than 15 May 2025.
VAT transactions charged at 15.5% must be reported in field 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.
The VAT return declarations
will be taken into consideration when verifications and/or audits on the affected VAT tax periods are conducted.
The VAT returns submitted must 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.
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Complexity and confusion around VAT increase
Kieswetter says he understands the complexity and confusion that resulted from this process. 'Sars will do its best to provide further clarity to create certainty of obligation for all vendors.'
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