Withdrawal of the increase in the South African VAT rate

On 12 March 2025, the Finance Minister proposed two increases in the standard VAT rate. The first rate increase of 0.5% would have applied from 1 May 2025, and the second rate increase of 0.5% would have applied from 1 April 2026. The increase in the VAT rate would have taken effect in respect of all supplies of goods or services made by a vendor on or after 1 May 2025.

On 24 April 2025, the Finance Minister released a media statement on the reversal of the VAT increase. The standard VAT rate will therefore remain at 15%, instead of the proposed increase to VAT as announced in the March Budget speech. The decision not to increase the VAT will result in an estimated revenue shortfall of R75 billion.
The media statement also mentions the withdrawal of the separate proposals to extend the list of zero-rated food items.
Going forward, the Finance Minister will introduce an updated 2025 Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, as well as a revised version of the Appropriation Bill and Division of Revenue Bill.
Taxpayers who were prepared for the change in the VAT rate will, unfortunately, need to disregard that work and revert to the existing rules.

Contributors:

Musa Nkosi - Consultant: Corporate Tax

Neil Hughes - Director: Tax & Trusts