VAT Increase is Real - How Can We Prepare?

The South African Revenue Service (SARS) has announced an increase in the standard VAT rate from 15% to 15.5%, effective 1 May 2025. A further increase to 16% will take effect on 1 April 2026. This change impacts all VAT-registered businesses, and accountants must ensure full compliance with the updated requirements.

Key Changes and Compliance Considerations

📌 VAT Rate Adjustment

• All taxable supplies, imports, and certain services will now be subject to VAT at 15.5% from 1 May 2025.

📌 Time of Supply Rules

• The VAT rate applicable is determined by the earlier of the invoice date or payment received.

• Transactions occurring before 1 May 2025 remain at 15%, while those on or after this date will be subject to the new 15.5% rate.

📌 Impact on Pricing & Invoicing

• Businesses must update pricing, quotes, invoices, and cash register systems to reflect 15.5% VAT from 1 May 2025.

• Debit and credit notes must align with the correct VAT rate based on transaction timing.

📌 Contracts & Agreements

• Businesses should review contracts to determine if they can pass the VAT increase onto customers.

• If a contract prohibits VAT increases, the business must absorb the cost.

📌 VAT Returns (VAT201)

• Mixed VAT periods (spanning April–May 2025) require careful reporting of both 15% and 15.5% VAT rates.

• SARS will update the VAT201 return format to accommodate this change.

📌 Imports & Customs Declarations

• Goods cleared for home consumption from 1 May 2025 will be subject to 15.5% VAT, even if ordered earlier.

• Importers must ensure accuracy in customs invoices and VAT calculations.

Next steps for accountants

• Ensure clients update pricing systems and invoices before 1 May 2025.

• Advise clients on the impact of contract clauses regarding price adjustments.

• Educate teams on time of supply rules to avoid incorrect VAT calculations.

• Prepare for compliance checks as SARS tightens enforcement.

For full details, see SARS's Pocket Guide on VAT Changes and FAQs on VAT Increase​​.

Join CIBA’s Tax Happy Hour on 19 March discussing the consequences of the changes in VAT rate.