South African Revenue Service issues guidance on implementing 0.5% VAT rise 1 May 2025
As part of the 2025 National Budget, the South African government announced an increase in the VAT rate from 15.0% to 15.5%, effective 1 May 2025. A further increase to 16.0% is scheduled for 1 April 2026. In preparation for this change, SARS released a FAQ and Pocket Guide outlining transitional rules and compliance guidelines for businesses and taxpayers.
Read more in our South African VAT guide.
1. General Rule – Time of Supply
VAT is generally accounted for using the time of supply rules. This is when the invoice is issued or payment is made—whichever occurs first. However, rate-specific rules override this in certain situations around the rate change.
2. Goods/Services Delivered Before 1 May 2025
Even if the time of supply occurs on or after 1 May 2025, the 15% VAT rate applies if:
- The goods (excluding non-residential fixed property) are delivered, or
- The services are performed before 1 May 2025.
- This applies only if the time of supply is triggered on or after 1 May 2025.
3. Supplies Spanning the Rate Change
For supplies (e.g., rentals, construction, or continuous services) that start before and end on/after 1 May 2025, the transaction must be apportioned:
- 15% VAT applies to the portion before 1 May.
- 15.5% VAT applies to the portion from 1 May onward.
This rule applies to:
- Rental agreements
- Progressive or periodic supplies
- Construction activities
- Long-term service contracts
It does not apply to fixed property sales.
4. Early Invoicing or Payments (12 March–30 April 2025)
If the time of supply is triggered between 12 March and 30 April 2025 but the actual supply happens:
- On or after 1 May 2025 (for services) or
- On or after 22 May 2025 (for goods),
Then 15.5% VAT applies.
If delivery or services are completed before those dates, the 15% rate still applies.
Exemptions include:
- Normal business practices of early invoicing
- Residential property sales
- Construction of new dwellings
This rule does apply to non-residential fixed property.
Residential Property Sales
Special rules apply to residential fixed property:
- If the contract is signed before 1 May 2025, and
- The payment and registration occur after that date, and
- The VAT-inclusive price is clearly stated in the contract,
Then the 15% VAT rate applies despite the time of supply occurring later.
This rule also covers:
- Real rights in property
- Share block company shares granting residential occupation
Lay-by Agreements
For lay-by sales:
- If the agreement and initial payment are made before 1 May 2025, the 15% rate applies.
- If made on or after 1 May 2025, 15.5% VAT applies.
If cancelled, the supplier must account for VAT on retained amounts using the tax fraction applicable to the agreement date (15/115 or 15.5/115.5).
