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The South African
27-04-2025
- Business
- The South African
Here's what SARS had to say about the VAT hike reversal
The South African Revenue Service (SARS) has confirmed that it will implement Finance Minister Enoch Godongwana's decision to reverse the planned 0.5% increase in Value-Added Tax (VAT), which was initially set to come into effect on 1 May 2025. SARS Commissioner Edward Kieswetter acknowledged the Finance Minister's announcement, noting the 'significant practical implications' for both VAT vendors and consumers. In a statement, Kieswetter stressed that SARS, as the administrator of national tax measures, would ensure the necessary adjustments are made promptly. The reversal follows the Minister's media statement and the publishing of Government Notice No. 6157 of 24 April 2025, alongside the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, which Parliament is expected to pass shortly. Vendors who have not yet implemented the 15.5% VAT rate should immediately stop any system changes. any system changes. All vendors must charge VAT at 15% for goods and services in line with the VAT Act from May 1, 2025. for goods and services in line with the VAT Act from May 1, 2025. Vendors unable to adjust their systems immediately may continue charging 15.5% until no later than May 15, 2025 but must report these correctly on VAT returns. but must report these correctly on VAT returns. VAT charged at 15.5% must be reported in Field 12 (output tax) and Field 18 (input tax) of the VAT return. and of the VAT return. Refunds or adjustments related to the 0.5% overcharge must also be reflected in Fields 12 and 18. The VAT return system will auto-calculate VAT at 15% for all tax periods starting on or after May 1, 2025. for all tax periods starting on or after May 1, 2025. Vendors who have already fully implemented both the 15.5% rate and any associated zero-rating are encouraged to reverse these changes before May 1. Kieswetter acknowledged the confusion the reversal has caused, stating: 'We understand the complexity and confusion that has resulted from this process. SARS will do its best to provide further clarity to create certainty of obligation for all vendors.' The VAT rate adjustment process comes after a period of public uncertainty and Parliamentary debate. SARS has promised to support vendors through the transition with further guidance as necessary. Vendors and taxpayers are urged to stay updated via official SARS communications as the May 1 deadline approaches. Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1 Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
IOL News
25-04-2025
- Business
- IOL News
SARS Confirms: VAT hike is dead - but the fallout is just beginning
The South African Revenue Service (SARS) has confirmed that the planned 0.5% increase in the Value Added Tax (VAT) rate, initially scheduled for May 1, 2025, will not proceed. This decision follows a recent announcement by Finance Minister Enoch Godongwana, who decided to reverse the increase in light of ongoing parliamentary deliberations and public feedback. On Friday, SARS Commissioner Edward Kieswetter emphasised that the tax authority is committed to ensuring a smooth transition and compliance with the new direction. "While many vendors and consumers have invested time and resources preparing for the increase, we acknowledge the importance of stability and clarity in the tax environment," Kieswetter stated. "The reversal is detailed in the government's notice published on April 24, 2025, which also introduces the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill in Parliament. Kieswetter said the bill is expected to be passed soon, adding that the new measures, which include specific guidelines for VAT vendors, will take effect on May 1, 2025.
The Citizen
25-04-2025
- Business
- The Citizen
Godongwana's Vat rewind may hit legal wall
Midnight media move won't stop hike without new legislation or court order. National Treasury and Finance Minister Enoch Godongwana's early morning announcement, made through a media statement, that he was reversing his decision to increase the value-added tax (Vat) appears to have no legal standing. The only way to overturn the increase is for Parliament to adopt a new Rates and Monetary Amounts and the Amendment of the Revenue Laws Bill. It is highly improbable that this will happen before 1 May, especially considering the SA public holidays next week. PwC tax partner Kyle Mandy says that Section 7(4) of the Vat Act operates as the law stands now because the minister announced in the 12 March Budget speech that the rate would increase on 1 May. The legal status of the minister's media statement released after midnight is 'probably zero'. ALSO READ: A R1 billion U-turn: Scrapping the VAT increase leaves no winners, just absolute chaos Legality vs reality 'The reality is that there are the legal and pragmatic sides to this matter. In the absence of the new bill being promulgated before 1 May, which is nigh on impossible, or an interdict being granted by the high court, it is hard to see that any Vat vendor is going to increase the rate based on pure legality. They would risk having a riot outside their doors.' This is not an ideal situation, and the whole saga has a 'Trumpish feel' to it, Mandy adds. Cedric Frolick, the house chair, said on behalf of the speaker of the National Assembly that the speaker and members of parliament in general 'have become aware' that the Minister of Finance intends to introduce a new bill proposing to retain the current Vat rate instead of the increase announced in March 2025. 'As a consequence, the minister will also withdraw the current Division of Revenue Bill and Appropriation Bill in order to propose expenditure adjustments. It is expected that the minister will then introduce new bills in the forthcoming weeks.' Frolick adds that these developments will have obvious consequences for Parliament and the National Assembly's programme. The effect of this will be the review of the parliamentary programme as it currently stands. Parliament is in recess until 1 May, and there are still several public holidays ahead. ALSO READ: Where will the minister find the money to make up for scrapping the VAT increase? Unchartered territory Aneria Bouwer, senior tax consultant at Bowmans, says Vat vendors are currently dealing with a draft bill that still states the Vat rate is 15.5%, and now there is a media statement stating that there will be a new bill proposing that the rate remains at 15%. 'You are stuck with two proposals in the form of a draft bill that has already been published, and the indication of another draft rates bill. From a legal perspective, the reversal of the increase is not something that is provided for in legislation. It really is uncharted territory.' Gerhard Badenhorst, Vat expert and partner at Cliff Dekker Hofmeyr, says vendors are at their wits' end because of the legal uncertainty they face. He has approached National Treasury and the South African Revenue Service for a directive clarifying the correct route. 'The reversal must follow a legal process, and I am not sure which process the minister has in mind before 1 May.' ALSO READ: Economists welcome scrapping of VAT increase Bartho van Tonder, director at Thomson Wilks Attorneys, says the minister has the power to change the rate and he did this on 12 March 2025. Section 7(4) does not specifically provide the power to make a further change or withdraw the change within another 12 months. The announced rate change would either be endorsed or changed through Parliament, through the adoption of the relevant bill. 'As noted from the minister's announcement, the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill will take at least several weeks to finalise. With the Vat rate scheduled to increase to 15.5% next Thursday, there is insufficient time to introduce the bill to prevent the increase in the ordinary course.' The DA and EFF have taken the minister and parliament to court, challenging the process followed to increase the rate, as well as the constitutionality of Section 7(4). Given the latest developments, it is uncertain whether the parties will settle the matter out of court or what the status of the case will be. ALSO READ: VAT U-turn: How businesses felt the brunt of political roulette It seems that the only effective and certain way that the Vat hike can be halted before the 1 May deadline is for the court to make this order on Tuesday 29 April 2025. Van Tonder says it appears that this may be the agreement reached between the minister and the DA. The DA confirmed late last night that lawyers acting for the Minister of Finance had approached the lawyers appointed by the DA to propose an out-of-court settlement. Mandy notes that 'as a general proposition' the courts don't make rulings on moot matters, although that doesn't apply here as 'legally' the media statement does not have legal standing. This article was republished from Moneyweb. Read the original here.
IOL News
24-04-2025
- Business
- IOL News
DA continues court challenge against VAT increase despite settlement offer
The Democratic Alliance will continue with its application to have the power given to Finance Minister Enoch Godongwana to decide on VAT without ratification of Parliament declared unconstitutional. Image: Armand Hough / Independent Newspapers DA Federal Council chairperson, Helen Zille, said on Thursday her party will proceed with its legal challenge regarding the constitutional validity of Finance Minister Enoch Godongwana's powers to raise VAT despite the latter's out of court settlement offer. Speaking to the media in the morning, Zille said the Part B application would move forward, regardless of any out-of-court settlement discussion with Godongwana. She said the power to raise tax was conferred to the Parliament, not the minister. 'Only Parliament can raise taxes. It is a power that can't be delegated to a minister. We will continue with Part B of our application,' she said. Zille also said the DA has yet to receive formal settlement out of court settlement offer from Godongwana. 'The minute we see it, we will know what he is asking for and what we will not do is not to withdraw Part B of our application. It is important get to the order of the court that only Parliament can raise taxes,' she told the journalists. Godongwana announced his decision to introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, which proposes to maintain the Value-Added rate at 15 per cent from 1 May 2025, instead of the proposed increase to VAT announcement in the Budget in March, two days after the court heard an application by the DA and EFF. Godongwana said the decision to forego the increase followed extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees. 'By not increasing VAT, estimated revenue will fall short by around R75 billion over the medium term. As a result, the Minister of Finance has written to the Speaker of the National Assembly to indicate that he is withdrawing the Appropriation Bill and the Division of Revenue Bill, in order to propose expenditure adjustments to cover this shortfall in revenue.' National Treasury said Parliament will be requested to adjust expenditure in a manner that ensures that the loss of revenue does not harm South Africa's fiscal sustainability. 'The decision not to increase VAT means that the measures to cushion lower income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited. 'To offset the unavoidable expenditure adjustments, any additional revenue collected by SARS may be considered for this purpose going forward.' The National Treasury said it will consider the proposals put forward as potential amendments in upcoming budgets as mechanisms to increase the resources available. While the national Treasury's statement was mum on the proposed out of court settlement with the DA, Zille said it came as a surprise very late last night on Wednesday their lawyers informed her they had been approved for a settlement offer by Godongwana's lawyers. She said it was less than a week Godongwana stated in the answering affidavit that the would increase the VAT on May 1. 'What happened between last Thursday and yesterday was DA challenge heard in court on Tuesday… I have no doubt his legal team went to him yesterday to say it looks inevitable the VAT increase could well be set aside by the court,' she said. Zille also said her party would check for necessary spending reviews. 'There is still quite a battle to run from this point onwards.' She said they expected Godongwana to make a formal out of court settlement offer and they will respond through their lawyers. Zille also noted that there was no precedence to their court case. 'We believe a court can set aside Parliament's acceptance of fiscal framework if it was unlawful and irrational,' she said, adding that they did not know which path was to be followed. "There were two main respondents in our case. Number one was the minister and obviously the National Treasury and two was Parliament,' she said. 'We have to seek a settlement agreement with both before we can say we have beaten this VAT increase. So it's important for us to say that while victory is a nose length away, we still have to cross the finishing line," Zille said. Asked about the DA's stay in the Government of National Unity, Zille said it was not her position to say under what circumstances the GNU should continue. 'I can't categorically answer now. A lot will depend on what happens today.' Zille also said the ANC, which held its press conference with smaller parties that voted for the fiscal framework, cancelled their meeting that was scheduled for 11am.
The South African
24-04-2025
- Business
- The South African
EFF calls for 'incompetent' Godongwana's head over VAT increase reversal
Although the Economic Freedom Fighters (EFF) has welcomed the decision to scrap the proposed VAT increase, the party has called for the immediate resignation of the Minister of Finance Enoch Godongwana. The party is among those who rejected the proposed 0.5 percentage point and even approached the Western Cape High Court to challenge the adopted fiscal framework which paved the way for the VAT hike. As previously reported by The South African , National Treasury said Godongwana would introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bills (Rates Bill), which proposes to maintain the VAT rate at 15% from 1 May, instead of the proposed increase announced in the 2025 Budget Speech. National Treasury said the decision to waive the VAT increase followed extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees. Following the decision, the Red Berets maintained that the 2025 Budget fails to appreciate the degree and the depth of the economic crisis South Africa is confronted with, adding that the budget failed to respond decisively to the crisis of unemployment and poor economic growth that now threatens a national economic collapse. 'South Africans need jobs and economic growth urgently, and the state is the only institution with the capacity to respond — yet the National Treasury remains obsessed with an unscientific fiscal anchor strategy that will only plunge South Africa into a deeper crisis,' the EFF said. The EFF also said the withdrawal of the 2025 Division of Revenue Bill and the Appropriations Bill effectively means that the budget is now withdrawn. It also means that the Minister of Finance has failed to comply with the legal and constitutional obligations governing the budget process. Furthermore, the party called for the immediate resignation of the Minister of Finance and the Director-General of the National Treasury saying the entire budget fiasco should be a reflection for the Minister of Finance and his Director General that they are out of depth and pose a threat to the economic stability of the country and, by consequence, are a threat to the livelihoods of South Africans. Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1. Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X, and Bluesky for the latest news.
