South Africa Suspends VAT Rate Increase
South Africa's Western Cape High Court has suspended the planned increase of the standard VAT rate from 15% to 15.5%, which was set to take effect on 1 May 2025.
Standard VAT Rate Increase in South Africa Suspended
According to the latest update, on 27 April 2025, the South African Revenue Service (SARS) officially welcomed the Western Cape High Court’s order suspending the planned 0.5 percentage point increase in the VAT rate, originally set to take effect on 1 May 2025. As a result of the court ruling, there is no basis for implementing a VAT rate of 15.5%, and therefore:
- Vendors are urged to revert their systems back to the current 15% rate; and,
- Consumers are advised to ensure they are not overcharged and to resolve any discrepancies directly with the vendor.
Find here an official press release from SARS.
The VAT rate hike was initially introduced in the 2025 Budget Speech, delivered on 12 March 2025. In that speech, the Minister of Finance had announced a two-step increase in the standard VAT rate:
- An increase from the current rate of 15% to 15.5%, originally planned to be effective by 1 May 2025. This is now suspended.
- A second increase—bringing the VAT rate to 16%—was 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. VAT rate hikes should be relatively neutral for most VAT-registered businesses making only taxable supplies. The increased VAT should be 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.
Practical guidance had been issued by the tax authorities in the form of FAQs to help vendors manage the change. However, now the measure rests uneffective following the suspension of the VAT rate hike.
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