South Africa VAT Rate Increase Effective 1 May 2025
South Africa raises standard VAT rate to 15.5% effective 1 May 2025. Further increase of the VAT rate is expected effective 1 April 2026.
VAT Rate Increase to 15.5%
In the 2025 Budget Speech delivered on 12 March 2025, South Africa’s Minister of Finance announced a two-step increase in the standard VAT rate:
- The current rate of 15% will rise to 15.5%, effective 1 May 2025.
- A second increase—bringing the VAT rate to 16%—is expected from 1 April 2026, subject to the passing of enabling legislation by Parliament within 12 months. This is the first change in South Africa’s VAT rate since 2018 and is part of broader fiscal efforts to increase revenue.
For most VAT-registered businesses making only taxable supplies, the impact should be relatively neutral. The increased VAT is passed on to customers, while input VAT on costs remains deductible. However, businesses involved in exempt or non-taxable supplies may face additional costs, as VAT incurred on related expenses cannot generally be reclaimed as input tax. In such cases, the VAT increase could directly affect margins and pricing.
From 1 May 2025, the new VAT tax fraction to calculate VAT from VAT-inclusive prices will be: 15.5 / 115.5.
Practical guidance was issued by the tax authorities in the form of FAQs to help vendors manage the change.
How Can Marosa Help You?
Businesses should review their pricing, systems, contracts, and compliance processes ahead of the rate change. Accurate invoicing and VAT reporting will be key during the transition.
Marosa assists clients in South Africa with VAT compliance, ensuring correct rates are applied based on delivery dates and service completion. Our team provides expert guidance on advance payments, continuous supplies, and regulatory changes, while our VAT reporting software ensures accurate VAT return reporting, identifyes discrepancies, and manages deadlines, allowing clients to stay compliant and focus on operations without the administrative burden.