It is proposed that the VAT rate will increase from 15% to 15.5% effective 1 May 2025. A further increase in the VAT rate from 15.5% to 16% will be effective on 1 April 2026.
In line with the proposed VAT rate increase, Government proposed to extend the list of zero-rated basic foods effective 1 May 2025, to include edible offal of sheep, poultry, goats, swine and certain cuts as heads, feet, bones and tongues of bovine animals; specific, as well as dairy liquid blend, tinned or canned vegetables.
It is important for vendors to consider the following, which will have an additional financial and compliance burden:
Pre-increase contractual arrangements and agreements with clients, suppliers and agents which must be amended;
Changes required to ERP systems, point of sale systems, in-store and electronic advertising, website updates, pricing adjustment, changes to tax invoices and credit notes and implementation of new ERP tax codes;
Pre-increase ERP test phases to ensure accurate implementation;
Ensuring compliance where VAT returns are bi-monthly and such tax period includes the old and increased VAT rate;
The factoring in of the VAT rate increase in determining annual apportionment ratio adjustments;
The correct VAT application of discounts, rebates and bad debt in respect of transactions prior to the effective rate change date; and
Application of the VAT transitional rules on the time of supply pertaining to goods and services supplied, with regards to pre- and post VAT rate change. In particular the treatment of transactions in respect of rental agreements, periodic or progressive supply of goods or service, and the sale of fixed property and construction contracts.
Non-compliance or incorrect implementation may result in penalties and interest imposed by SARS.
Other notable VAT proposals
Value-added tax Debit and credit notes relating to a going concern as per section 8(25) of the VAT Act for returned goods or services to the transferee under section 42 or 45 of the ITA;
Widening the intermediary provisions in respect of “electronic services” to include supplies facilitated on behalf of local suppliers;
Reviewing VAT rules dealing with documentary requirements for silver exports;
Updating the wording of regulation 8(2)(e)(ii) of the Export Regulations;
Amendment to section 11(2)(l) of the VAT Act in respect of medical trials conducted in South Africa by non-residents;
Updating the regulations on the domestic reverse charge mechanism relating to valuable metal;
Reviewing the definition of “insurance” In light of the Capitec Bank court case;
Clarifying the VAT treatment of temporary letting of residential properties; and
Reviewing the VAT treatment of airtime vouchers supplied in South Africa for exclusive use in an export country.
Please contact us should you require our assistance with any of the above items or require advisory service in respect of the VAT compliance requirements.
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