By Lehlohonolo Lehana.
The South African Revenue Service (SARS) has instructed the vendors to reverse the 0.5-percentage-point value-added tax (VAT) hike on their payment systems, with adjustments to be made no later than mid-May.
Businesses have spent millions adjusting their systems to prepare for the increase which was due to take effect on 1 May 2025 and will now have to undo that work after this week’s announcement that the increase would be withdrawn.
This follows Finance Minister Enoch Godongwana’s abrupt reversal on Thursday of his budget announcement to raise the Vat rate by 0.5 percentage points this year and an additional 0.5 percentage points next year.
Also on Thursday, the National Treasury introduced a new draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, published in the Government Gazette, in response to the decision to cancel the Vat hike plan.
The bill aims to “provide for the reversal of the Vat increase in terms of Section 7(4) of the Vat Act and to address related matters.”
“This reversal has significant practical implications for both Vat vendors and consumers, “SARS commissioner Edward Kieswetter notes in a statement on Friday afternoon.
Kieswetter says the following measures will apply to all VAT vendors, with effect from Thursday, 1 May:
- VAT vendors who have not implemented the change in the VAT rate — should 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 required.
- If a vendor is not 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. The deadline to complete any necessary VAT system adjustments is Thursday, 15 May 2025.
- On the VAT return forms, VAT transactions which were charged at 15.5% must be reported in field 12 (for output tax) and field 18 (for input tax).
- Adjustments in the form of refunds of the 0.5% rate to customers must be reported in field 12, and refunds from suppliers must be reported in field 18.
- 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 notes that he “understands the complexity and the confusion” that has resulted from the uncertainty and subsequent reversal of the Vat decision.
“Sars will do its best to provide further clarity to create certainty of obligation for all vendors.”
Meanwhile the Economic Freedom Fighters (EFF) says it has requested the immediate circulation of all related correspondence from Godongwana to the Office of the National Speaker Thoko Didiza.
The EFF, in a letter expressed “its deepest concern regarding the fiscal and governance vacuum.
The party says Godogwana does not have the powers to reverse the Value Added Tax (VAT) increase because it was passed in Parliament.